If you had debt canceled or forgiven during the year, the IRS generally considers it taxable income, since you received money, goods, or services without repaying the obligation.
You should receive Form 1099-C, which reports:
- The amount of canceled debt in Box 2
- The date of cancellation in Box 1
- The type of debt and creditor information
⚠️ Important:
Not all canceled debt is taxable. Exceptions may apply for:
- Bankruptcy
- Insolvency
- Qualified principal residence indebtedness (limited cases)
- Certain student loan forgiveness programs
To determine if the canceled debt is taxable, enter the information from Form 1099-C into the program. The system will guide you through the necessary steps and help apply any exclusions if eligible.