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Category: Tax Questions

Form 982 - Reduction of Tax Attributes

When an individual has a debt that has been discharged, the amount that was discharged is generally treated as taxable income to the individual.  Under certain circumstances, this amount can be excluded from income, and therefore not taxed.  In order to report the exclusion, the taxpayer must file Form 982 with their tax return.

According to The Mortgage Forgiveness Debt Relief Act and Debt Cancellation on the IRS website:
"Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Adjustment), is used for other purposes in addition to reporting the exclusion of forgiveness of qualified principal residence indebtedness.  If you are using the form only to report the exclusion of forgiveness of qualified principal residence indebtedness as the result of foreclosure on your principal residence, you only need to complete lines 1e and 2.  If you kept ownership of your home and modification of the terms of your mortgage resulted in the forgiveness of qualified principal residence indebtedness, complete lines 1e, 2, and 10b.  Attach the Form 982 to your tax return."
You can also use the Interactive Tax Assistant available on the IRS website to determine if cancelled debt is taxable.  The ITA takes you through a series of questions and provides you with responses to tax law questions.

 To display instructions for entering Form 982 in the tax program click here.

 To display instructions for entering Form 1099-C in the tax program click here.


NOTE: This is a guide on entering Reduction of Tax Attributes into the TaxSlayer Pro program.  This is not intended as tax advice.  For additional information refer to the Additional Links below.



Additional links:
Publication 4681
Mortgage Forgiveness Debt Relief Act