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New Member

How much tax is charged on a credit card settlement?

I want to ask my credit card for a settlement to get a reduced amount and then just pay off in one lump sum. I understand I must claim the written off amount as income. Was is the percentage tax on the written off amount?

1 Reply
Level 15

How much tax is charged on a credit card settlement?

The credit card company will issue a 1099C for the amount written off.

This is taxed as ordinary income.

So for example, if you were in the 15% tax bracket for 2016, and income is expected to stay close to same, then the amount written off would be taxed at 15% (so  $10,000 would be $1,500 tax).

The tax brackets are listed below and may help you in determining what tax bracket you are in.

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