Lose Home, Pay More Tax

As foreclosures soar, a cruel tax rule rears its head.

At first blush, the double whammy seems so cruelly unfair that it must be untrue.

First, you lose your house in a foreclosure -- perhaps you fell behind in the payments after you lost your job, you got sick or your husband or wife died. Then the law orders the IRS to pile on the grief by charging you income tax on part of your loss.

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Kevin McCormally
Chief Content Officer, Kiplinger Washington Editors
McCormally retired in 2018 after more than 40 years at Kiplinger. He joined Kiplinger in 1977 as a reporter specializing in taxes, retirement, credit and other personal finance issues. He is the author and editor of many books, helped develop and improve popular tax-preparation software programs, and has written and appeared in several educational videos. In 2005, he was named Editorial Director of The Kiplinger Washington Editors, responsible for overseeing all of our publications and Web site. At the time, Editor in Chief Knight Kiplinger called McCormally "the watchdog of editorial quality, integrity and fairness in all that we do." In 2015, Kevin was named Chief Content Officer and Senior Vice President.