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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.

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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.

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Canceled debts that are considered income, but that can be excluded from your taxable income are called “exceptions to cancellations of debt.

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Here are the six exceptions to paying taxes on canceled debt. suffered total or permanent disability is no longer considered taxable income.

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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.

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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.