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Scottsdale Debt Cancellation Lawyer

Taxable Cancellation of Debt Income Under the IRC

Anyone who is overwhelmed with debt - whether it is home loans or consumer credit - may jump at the chance to obtain cancellation of those debts. What they may not know, however, is that most debt cancellations are taxable as income under the Internal Revenue Code (IRC). For example, if someone owes $6,000 in consumer credit, but is only able to repay $1,500 of that debt before defaulting, their lender could forgive the remaining $4,500; however, that amount will be taxed as income for that year.

Exclusions to Taxable Cancellation of Debt Income

Cancellation of debt is not always taxable, though. Exceptions for this type of taxation include bankruptcy, insolvency, and non-recourse loans. If you file for bankruptcy, your debt forgiveness will not be taxed, nor will any debts that are forgiven in an "underwater loan," where you owe more than the fair market value of the property. A non-recourse loan is one in which, when the borrower defaults, the lender cannot pursue repayment other than by foreclosure. Each of these cases of debt cancellation is not taxable as income, so speak with a Scottsdale federal tax attorney today if you need legal assistance.

Contact a Debt Cancellation Attorney in Scottsdale, AZ

Don't hesitate to call the offices of Grant N. McKeehan, PLC immediately if you have questions or concerns regarding debt cancellation and your taxes. Through an initial consultation, you could find out whether or not your cancellation would be taxable, which would allow you to make an educated and beneficial decision. Without proper legal guidance from a federal tax lawyer, you could be adversely affected by taxable cancellation of debt income, so call today to speak with Attorney McKeehan. He could help you find the freedom you need without suffering unnecessary taxation.

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Grant N. McKeehan, PLC - Scottsdale Estate Planning Attorney
Located at 4300 North Miller Road, Suite 220 Scottsdale, AZ 85251. View Map
Phone: (888) 913-8943 | Local Phone: (602) 791-6174.