"Qualified principal residence indebtedness is any mortgage you took out to buy, build, or substantially improve your main home. It must be secured by your main home. Qualified principal residence indebtedness also includes any debt secured by your main home that you used to refinance a mortgage you took out to buy, build or substantially improve your main home, but only up to the amount of the old mortgage principal just before the refinancing.” (IRS Publication 4681)
For Tax Years 2021 through 2025
Per instructions for Form 982 - "If the income you exclude is from discharge of qualified principal residence indebtedness and one of the following applies. The debt was discharged before 2026. The debt was discharged subject to an arrangement that was entered into and evidenced in writing before January 1, 2026. Also, do not check box 1e if the discharge occurs in a title 11 case. You must check the box on line 1a and not this box. If you are insolvent (and not in a title 11 case), you can elect to follow the insolvency rules by checking box 1b instead of checking box 1e. "
For Tax Year 2020 and prior
Per instructions for Form 982 -“If the income you exclude is from discharge of qualified principal residence indebtedness and one of the following applies. The debt was discharged before 2021. The debt was discharged after 2020 and the discharge is subject to an arrangement that was entered into and evidenced in writing before January 1, 2021. Part or all of your debt may still qualify for one of the other exclusions.”
What if I have other exclusions?
Per IRS Publication 4681 “Other exclusions must be applied before the qualified principal residence indebtedness exclusion. This exclusion doesn't apply to a cancellation of debt in a title 11 bankruptcy case. If qualified principal residence indebtedness is canceled in a title 11 bankruptcy case, you must apply the bankruptcy exclusion rather than the exclusion for qualified principal residence indebtedness. If you were insolvent immediately before the cancellation, you can elect to apply the insolvency exclusion.”
Program Entry
To enter Form 982 in the program, go to:
- Federal Section
- Income
- Select My Forms
- Less Common Income
- Cancellation of Debt Form 1099-C, Form 982
- Exclusions, Form 982
To view a copy of the IRS Form 982 click here.