IRS considering "charged off" debt as incomeSubmitted by meekandmild on Wed, 03/13/2013 - 22:22
It may help your wallet — and your mental health — to have old debts forgiven. But that relief could also come with an unexpected visit from the tax man.
As my colleague Jennifer Waters reported this week, the Internal Revenue Service expects people to pay taxes on forgiven debt of $600 or more. While the act of borrowing itself isn’t a taxable event, a debt such as a credit card balance that is cleared — rather than paid off — is considered taxable income, since the funds were used to pay for services and belongings that you no longer owe money on, she explains. Some exceptions include certain kinds of canceled mortgage debt and home-equity lines of credit.