Finance category
Mortgage, loan, investing, tax, and money calculators.
Short Sale Deficiency Calculator
In a short sale, home sells for less than loan balance. The difference (deficiency) may be forgiven, pursued via judgment, or taxed as cancellation of debt income. This calculator sizes the shortfall and flags state rules.
Deficiency amount
$78,000
Deficiency judgment exposure
$78,000
Potential COD tax
$0
Net sale proceeds
$232,000
How the math works
$310K loan, $250K sale, $18K costs: deficiency $78K. In non-anti-deficiency state with investment property: $78K lender exposure + COD tax at 22% = $17K.
Anti-deficiency states protect primary residence purchase money. For investment or non-anti-deficiency states, negotiate deficiency waiver in writing as part of short sale approval. Get CPA and attorney before accepting.
How to Use
- Enter sale price, loan balance, and state.
- See deficiency amount and likely outcome.
Frequently Asked Questions
Anti-deficiency state?
Several states (AZ, CA, OR, WA, NC, NV) prohibit or limit deficiency judgments on first-lien residential purchase loans. Non-anti-deficiency states: lender can sue for difference. Know your state.
Is deficiency taxable?
Cancellation of debt is generally taxable income. Mortgage Debt Relief Act extensions exclude up to $750K of primary residence COD through 2025 (current). Investment property: taxable unless insolvent or specific exclusion.
1099-C treatment?
Lender issues Form 1099-C for forgiven debt. You report. Can exclude if: principal residence exception, insolvency, bankruptcy, or other Section 108 provisions. Talk to CPA before accepting.
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