The canceled debt isn't taxable, however, if the law specifically allows you to exclude it from gross income. These specific exclusions will be discussed later.
According to the IRS, nearly any debt you owe that is canceled, forgiven or discharged becomes taxable income to you. You'll receive a Form C.
Canceled debts that are considered income, but that can be excluded from your taxable income are called “exceptions to cancellations of debt.
Here are the six exceptions to paying taxes on canceled debt. suffered total or permanent disability is no longer considered taxable income.
Generally, debt that is forgiven/canceled is considered taxable income by the IRS & must be included as income on your tax return. Here are the exceptions.
If you borrow money from a commercial lender and the lender later cancels or forgives the debt, you may have to include the cancelled amount in your taxable.