Is canceled debt taxable?
In general, if you have cancellation of debt income because your debt is canceled, forgiven, or discharged for less than the amount you must pay, the amount of the canceled debt is taxable and you must report the canceled debt on your tax return for the year the cancellation occurs. The canceled debt isn't taxable, however,
How do I report canceled debt?
You must report any taxable canceled debt as ordinary income on: 1 Schedule 1 (Form 1040), line 8, if the debt is a nonbusiness debt; 2 Schedule C (Form 1040), line 6, if the debt is related to a nonfarm sole proprietorship; 3 Schedule E (Form 1040), line 3, if the debt is related to nonfarm rental of real property; More items
What is ordinary income from the cancellation of a debt?
Your ordinary income from the cancellation of the debt is the amount of the debt in excess of the FMV of the property that the lender forgives. You must include this cancellation of debt in your income unless an exception or exclusion, discussed below, applies.