How to Fill Out IRS Form 982 With Credit Card Debt

Cancellation or forgiveness of a taxpayer's indebtedness results in taxable income to the taxpayer.

The Internal Revenue Service considers that the cancellation or forgiveness of a taxpayer's indebtedness results in taxable income to the taxpayer. In the case that credit card debt in excess of $600 is forgiven, the taxpayer will typically receive Form 1099-C, Cancellation of Debt, from the credit card company. The credit card company will have additionally reported this cancellation of debt to the IRS. Typically, the taxpayer must report the amount of debt cancellation as income unless one of several exceptions applies. If one of these exceptions applies, the taxpayer must file Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness.


Step 1

Determine if the forgiveness of your debt is related to a qualifying event. Typically, the only qualifying reasons for the forgiveness of nonbusiness bad debts, such as credit card debt, are a Chapter 11 bankruptcy or declared insolvency of the taxpayer. If either of these two events do not apply, you may generally not file Form 982 for credit card debt forgiveness and must report the forgiven debt as ordinary income.


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Step 2

Check the appropriate box in Part I - General Information of Form 982, typically either "Discharge of indebtedness in a title 11 case" or "Discharge of indebtedness to the extent insolvent (not in a title 11 case)."

Step 3

Input, on line two of Form 982, the total amount of forgiven debt you wish to exclude from income. Generally, this will be the amount reported to you on Form 1099-C.



Step 4

Input, on Part II - Reduction of Tax Attributes, the amount from line two onto line 10a, "Applied to reduce the basis of nondepreciable and depreciable property."

Step 5

File Form 982 with your Form 1040, U.S. Individual Income Tax Return, for the tax year in which your debt was forgiven.


Certain declared federal disaster events may be deemed a qualifying event for purposes of Step 1. These are rare.

The line item numbers given in these instructions refer to the 2011 version of Form 982. It is possible that the line item numbers may vary in future versions of the form.


If you are only partially, not fully insolvent, the amount reported in Step 4 may be reduced to the value of your net assets.

Taxes can be confusing and your situation may differ from that contemplated in this article. Always contact a tax professional.

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