What is debt forgiveness?
Here’s what you need to know:
If you’re having difficulty paying off your debt, you may have options as far as debt forgiveness. These options could apply to you if you’re having trouble with:
- Your mortgage
- Student loans
- Credit Card debt
- Medical bills
If your debt is outstanding and seemingly insurmountable, you may be able to contact your lender(s) regarding things like payment plans, debt management, and debt consolidation. These options may seem appealing in the short term but might also damage your credit score or require drastic steps, like filing for bankruptcy.
Is debt forgiveness taxable?
Tax debt forgiveness affects every tax situation differently, depending on taxpayers’ individual or familial circumstances. For example, if you borrow money and your debt is forgiven by the lender, you might need to include the canceled portion of the debt in your income.
Lenders are also usually required to report the amount of debt canceled using Form 1099-C, Cancelation of Debt. However, there are several exceptions, like insolvency or bankruptcy, to how much your canceled debt can be taxed.
If you’d like to know more about how debt cancelation might affect your taxes, check out the IRS’ Publication 4681, Canceled Debts, Foreclosures, Repossession, and Abandonment.
Why Jackson Hewitt®?
We’re not tax machines. We’re Tax Pros who are happy to answer all of your questions, provide you with tips, and help you get smarter about your money.
We’ve seen it all — from the simple to the complex — and we’ll get you every credit and deduction you deserve. Our returns come with our Maximum Refund and Lifetime Accuracy guarantees – we’ll get it right or we pay you.
Our Tax Pros are there to help wherever you are. We’re conveniently located and offer a confidential, secure space to discuss your taxes. We’ll even get you started in advance with document drop-off or upload.