What Form 1099-C (2024) Is For
IRS Form 1099-C (2024) reports canceled, forgiven, or discharged debts of $600 or more. Creditors, including banks, credit unions, federal agencies, credit card companies, and nonprofit organizations, must file this form when they forgive or discharge a debt. The IRS considers canceled debt taxable income because the borrower received money and is no longer required to repay it.
The form includes information such as:
- The amount of debt discharged
- Interest is included
- Whether the borrower is personally liable for repayment
- The fair market value of any property involved
- The reason for debt cancellation
Taxpayers receive Copy B of Form 1099-C by January 31 of the following year, while the Internal Revenue Service gets its own copy directly from the creditor.
When You’d Use Form 1099-C
Form 1099-C applies when a lender cancels a debt that is considered a qualifying debt. Common examples include forgiven credit card balances, unpaid personal loans, and discharged mortgage or auto loans. A creditor might also issue this form when a debt is canceled due to bankruptcy, foreclosure, settlement, or expiration of the statute of limitations.
If the form arrives after a tax return has already been filed, an amended tax return (Form 1040-X) must be completed. Taxpayers should confirm that all details are accurate before submitting their return. If a creditor continues to collect on a debt after issuing Form 1099-C, the borrower should contact the creditor immediately to request a corrected version of the debt.
For complete details on wage reporting, withholdings, and unemployment tax filings, see our guide for Information Returns & Reporting Forms.
Key Rules for the 2024 Tax Year
Reporting Threshold
Creditors must report canceled debts of $600 or more in value. Even if a taxpayer does not receive the form, they must report the income from forgiven debt unless an exclusion applies.
Qualified Principal Residence Exclusion
Homeowners can exclude canceled mortgage debt on their primary home through December 31, 2025. The exclusion applies to up to $750,000 in forgiven debt ($375,000 if married filing separately) when the funds were used to buy, build, or substantially improve the home.
Student Loan and Education Debt Relief
For student loans forgiven between December 31, 2020, and January 1, 2026, the discharged amount is not taxable. This includes federal student loans, private educational loans, and loans from nonprofit organizations or academic institutions. However, loan forgiveness received in exchange for services remains taxable income.
Joint Liability and Recourse Debt
When multiple borrowers are jointly and severally liable, each receives a separate Form 1099-C. Each taxpayer must report only their share of the forgiven debt. For recourse loans, where the borrower is personally liable, canceled debt generally becomes taxable income. For nonrecourse loans, such as some mortgages, foreclosure or repossession may result in a capital gain rather than cancellation of debt income.
Step-by-Step (High Level)
Step 1: Review Form 1099-C upon receipt
Taxpayers should verify the amount of debt discharged, whether interest was included, and whether they were personally liable for the debt.
Step 2: Determine whether exceptions apply
Some forms of canceled debt are not taxable, such as gifts, inheritances, or price reductions from sellers.
Step 3: Check for exclusions
Exclusions apply when the debt is canceled under bankruptcy, insolvency, qualified farm debt, or qualified principal residence indebtedness. Use the Insolvency Worksheet in IRS Publication 4681 to determine eligibility.
Step 4: File Form 982 if excluding income
Taxpayers who exclude forgiven debt are required to file Form 982. The form reduces tax attributes, such as net operating losses or property basis, in accordance with IRS rules.
Step 5: Report any taxable portion
Any debt that does not qualify for an exclusion must be reported as other income on Schedule 1 (Form 1040) or on business schedules as applicable.
Common Mistakes and How to Avoid Them
Taxpayers often make reporting errors regarding canceled debt income, which can result in IRS notices or incorrect tax calculations. These common mistakes can be avoided through careful documentation and a thorough understanding of IRS rules.
- Ignoring Form 1099-C canceled debt income: Report the forgiven debt or properly claim an exclusion, since the IRS also receives a copy of Form 1099-C from the creditor.
- Claiming insolvency without documentation: Prepare a detailed list of all assets and liabilities immediately prior to the debt cancellation, and retain supporting documentation for values and account balances.
- Reporting the full forgiven amount for joint debts: Report only your share of the canceled debt based on your repayment responsibility and how you benefited from the loan proceeds.
- Confusing recourse and nonrecourse debt: Confirm the debt type before reporting, since the classification can change whether the result is ordinary income, capital gain, or another treatment.
- Failing to reduce tax attributes after excluding debt: Apply required tax-attribute reductions—such as loss carryovers or basis adjustments—when using bankruptcy or insolvency exclusions
Accurate reporting, proper documentation, and understanding debt classifications help taxpayers stay compliant and avoid IRS penalties or reclassification of income.
What Happens After You File
After submitting a tax return that includes a Form 1099-C, the Internal Revenue Service matches the canceled debt reported by creditors with the taxpayer’s filing. If all amounts and forms, including Form 982 for exclusions, are accurate, the IRS will process the return in a usual manner.
If discrepancies occur—such as unreported income or an incorrect fair market value—the IRS may send a notice requesting clarification or additional payment. Taxpayers should contact the creditor or loan servicer if the information appears inaccurate. Ensuring that debt forgiveness or loan forgiveness is reported correctly helps avoid penalties and future audits.
FAQs
What is IRS Form 1099-C (2024) used for?
IRS Form 1099-C (2024) reports canceled debt when a creditor forgives or discharges a loan of $600 or more. The Internal Revenue Service requires this form to record debt cancellation as potential taxable income for borrowers who no longer repay the loan.
Are forgiven federal student loans considered taxable income?
Federal student loans forgiven under debt relief programs through 2025 are not treated as taxable income. This includes loan forgiveness for borrowers who use federal student aid, nonprofit organizations, or public service programs that offer qualified education debt forgiveness.
How does the Servicemembers Civil Relief Act affect debt forgiveness?
The Servicemembers Civil Relief Act protects qualifying members from high interest, foreclosure, and specific loan collection actions. However, it does not automatically exclude forgiven debt from taxation, so servicemembers must still review how cancellation affects their tax return.
Can canceled credit card balances or remaining balances be excluded from taxes?
Canceled credit card balances are usually taxable income. Taxpayers may qualify for exclusions under bankruptcy or insolvency rules if they can prove through fair market value calculations that liabilities exceeded assets when creditors or lenders canceled the debt.
What should taxpayers do after receiving Form 1099-C for debt cancellation?
Taxpayers should review Form 1099-C for accuracy, contact the creditor or loan servicer for corrections, and report the forgiven debt properly on their tax return. They may exclude certain canceled debts if they meet exceptions or qualify for federal debt forgiveness programs.
For more resources on filing or understanding prior-year IRS forms, visit our Form Summaries and Guides Library or see our IRS assistance guide.
