Negative equity, can’t deduct, taxed if I foreclose. HELP!?
My wife and I have a condo we rent at a loss of $ 700/mo. We own a different primary residence as well. While doing taxes this year, we discovered our AGI is over $ 150k and we were unable to deduct ANY of our rental expenses including our $ 700/mo loss throughout the year. We are approximately $ 85,000 in negative equity on the condo.
We are considering foreclosure on the condo. I discovered the wonderful 1099-C tax implications if we were to do that. It’s not our primary residence and I do not believe we can prove insolvency.
We don’t expect the property to appreciate and surpass our liability anytime soon. The condo loan is interest only and we pay about $ 1750/mo in mortgage interest each month.
Is it better to foreclose and pay taxes on the $ 85k in canceled debt? Do we have any other options so we don’t get trashed in taxes next year?