Homeowners who sell their houses by means of a short sale are often very concerned with the tax implications of the sale. The bank, by forgiving a portion of the debt, is then responsible for reporting the forgiven quantity to the IRS as income to the borrowers. At tax time, the former homeowners are responsible for including this quantity within their gross income and then paying taxes on it.

I have a first and second mortgage (to avoid PMI) and I am wondering if, after foreclosure, if we are going to be liable finacially for the banks loss, or the difference between our loan balance and what they get in the foreclosure sale? I know that our credit score will be affected, but I am wondering if that is the only repercussion? I also know the laws are different in states I am in Nevada anyone that knows the nevada foreclosure law specifically would be great. I am also wondering once we move out, assuming we do so before notice to evict what role will we, as the homeowners, need to play in the foreclosure process? I have heard that you must fill out a 1099 form for taxes? saying the difference between the amount owed and what the bank gets is roughly 30,000 what would that mean we pay at tax time?