Posted on December 1, 2009 at 11:32 pm Would you guys explain how the income tax on forgiven debt work?

Posted on December 1, 2009 at 11:52 pm Would you guys explain how the income tax on forgiven debt work?An example:If your original balance was $3000 and it was settled for $2000, the $1000 that was written off by the credit card company is going to be considered taxable income by the IRS.

Posted on December 1, 2009 at 11:54 pm Wow really? But I don't understand, I'm already broke to begin with -- and the government wants a cut? What? Is there a way to avoid this? Or maybe there's an exemption?

Posted on December 2, 2009 at 12:12 am Income tax on forgiven debt -Nobody can explain that cats but perhaps you can take comfort in the fact that not all types of forgiven debt is taxable (Home mortgage debt that is forgiven is not taxable, until 2012?), and under some conditions some forgiven credit card debt are not taxable as well (you'd have to file an Offer in Compromise for it).

Posted on December 2, 2009 at 1:13 am Income Tax On Forgiven Debt - Offer In CompromiseI heard that that Offer In Compromise doesn't really work ... how does one qualify for it?

Posted on December 2, 2009 at 2:19 am Income Tax On Forgiven Debt - Offer In CompromiseOffer In Compromise is the IRS'  willingness to settle the debt for a single lesser payment, if you are able to prove that your income and assets are not significant enough to ever pay the debt off--- but you're right, only a very small percentage of applicants get approved.You can read more about it here:http://www.irs.gov/businesses/small/article/0,,id=104593,00.html

Posted on March 5, 2010 at 6:10 am A question: How much income tax in percentage is expected by the IRS on forgiven debt?

Posted on March 5, 2010 at 6:14 am I am not too sure, but I heard 25%  - but when it comes to tax amountsit's always wise to consult with tax experts.

Posted on April 13, 2010 at 2:40 am Good news for those that live in California...here's an excerpt from an article that discusses forgiven debt taxation relief:  "The California Legislature has just passed a new law that will prevent the state from taxing forgiven home debt as income from the nearly 100,000 people who lost their homes there in 2009.  Prior to this law, when a lending institution was willing to forgive a certain amount of a person's debt, the borrower would still have been required to pay state income taxes on the amount that was forgiven, which could have easily reached several thousand dollars.  Gov. Arnold Schwarzenegger is said to be planning to sign the bill.  The bill will apply to those who lose their homes between 2009 and 2012."  Hope this helps some of you. 

Posted on April 13, 2010 at 2:47 am Income tax on forgiven debt should not be a priority for consumers who are drowning in debt. The priority should be debt elimination or reduction.