TurboTax FAQ
TurboTax FAQ
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Is cancelled, forgiven, or discharged debt taxable?

Cancelled, forgiven, and discharged debt is considered taxable income, unless it qualifies for an exclusion or an exception.

Normally the debt is reported on Form 1099-C. Make sure you enter your 1099-C in TurboTax even if it qualifies for an exclusion or an exception.


  • Cancellation of qualified principal residence indebtedness, better known as mortgage debt relief;
  • Debt cancelled in a Title 11 bankruptcy;
  • Debt cancelled during insolvency (the amount exceeding your assets);
  • Cancellation of qualified farm or real property indebtedness.

If the debt qualifies for any of these exclusions, TurboTax will complete Form 982 and include it with your return.


  • Certain qualified student loans;
  • Money excluded from income by law, such as gifts or bequests;
  • Cancelled 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.

Tip: If your creditor is still trying to collect on your debt, it's not considered cancelled, forgiven, or discharged. There is no taxable income to report, not even if you got a 1099-C from the creditor.