Canceled Debt (Form 1099-C)

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A 1099-C is used to report cancellation of debt income. However, you may not have to report the amounts as taxable income if you meet certain exclusion qualifications. The canceled debt exclusions are as follows:

1. If you are insolvent. Insolvency means the balance of your debts are greater than the fair market value of your assets on the day before your debt was canceled.
2. Your debt was canceled as part of a bankruptcy.
3. Your debt is qualified main home indebtedness (this is available through 2025).
4. Your debt is qualified farm indebtedness.
5. Your debt was from qualified real property business indebtedness.

The most commonly used exclusions are insolvency, bankruptcy, and qualified main home indebtedness. The Mortgage Forgiveness Debt Relief Act of 2007 allows certain individuals to exclude any discharges of qualified principal residence indebtedness from their income.

There are some other situations where canceled debt may not be taxable. See the following FAQ if your canceled debt involves student loan debt.

What if my student loan debt was canceled?