Canceled, forgiven, and discharged debt is considered taxable income, unless it qualifies for an exclusion or an exception, defined below.
To enter your 1099-C:
- Open or continue your return, if it isn't already open.
- From the upper right menu, select and search for 1099-C or 1099C (lower-case also works).
- Select the Jump to link at the top of the search results.
- On the Tell us about your canceled debt screen, select Yes.
- Select the type of canceled debt (main home or other) and then select Continue.
- Follow the instructions to enter info from your 1099-C.
Exclusions
- Debt canceled in a Title 11 bankruptcy
- Debt canceled during insolvency (the amount exceeding your assets)
- Cancelation of qualified farm or real property indebtedness
- Cancelation of qualified principal residence indebtedness, better known as mortgage debt relief
Exceptions
- Certain qualified student loans
- Money excluded from income by law, such as gifts or bequests
- Canceled debt that if paid by a cash-basis taxpayer would otherwise be deductible
- A qualified purchase price reduction given by a seller
- Any Pay-for-Performance Success Payments that reduce the principal balance of your mortgage under the Home Affordable Modification Program
To determine which apply to you, we recommend you consult a tax professional or see IRS publications 4681 or 544.
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