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Canceled Debts

What is Canceled Debts?

When a portion of a debt, resulting from a loan or credit purchase, is forgiven or discharged, the forgiven amount is typically considered taxable income for the debtor.

Key Points:

  • Canceled debts occur when a creditor forgives a portion of what you owe, which can happen in various situations, including debt settlements.
  • The forgiven debt is usually treated as income for tax purposes, potentially leading to additional tax liabilities.
  • It’s essential to report canceled debts accurately on your tax returns and explore potential exclusions or exceptions.
References

“Glossary.” HealthCare.gov, www.healthcare.gov/glossary/.

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