Caution: DO NOT use this version for discharge of indebtedness in tax years beginning after 1993-2025

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Form 1099-C is a federal tax form required by the IRS. Lenders and other creditors must submit a copy to the agency and to taxpayers whenever they cancel or forgive a debt worth $600 or more.
Key Takeaways However, certain types of canceled debts are not taxable under IRS rules - including debt forgiven as gifts, bequests, or inheritance, student loan debt under certain circumstances, and debt discharged through Chapter 7, 11, and 13 bankruptcy.
Discharge of Debt Income The amount of income reported from debt cancellation is generally the difference between outstanding debt owed and any amount paid to settle the obligation. The amount paid to settle a debt includes any money paid and/or the fair market value of property transferred to the lender.
Exclusions from gross income: Debt canceled in a Title 11 bankruptcy case. Debt canceled to the extent insolvent. Cancellation of qualified farm indebtedness. Cancellation of qualified real property business indebtedness.
In general, if your debt is canceled, forgiven, or discharged for less than the amount owed, the amount of the canceled debt is taxable.

People also ask

You may exclude the cancellation of indebtedness if it was a: Discharge of qualified principal residence indebtedness. Discharge of indebtedness in a title 11 case. Discharge of indebtedness to the extent insolvent (not in a title 11 case)
If you had debt cancelled and are no longer obligated to repay the debt, the amount forgiven is considered income on your tax return.
The most common situations when cancellation of debt income is not taxable involve: Bankruptcy: Debts discharged through bankruptcy are not considered taxable income. Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you.

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