If you’re expecting your student loans to be forgiven this year, or anticipating a creditor to stop collecting what you owe, you’ll probably end up with canceled debt in the near future. When tax season comes, you may be wondering if this canceled debt is taxable and how you should include it on your tax return.

A tax accountant can help you figure that out, and for more than 40 years, Sharrard McGee & Co PA has helped High Point and Greensboro, NC, residents with tax questions just like this. Here’s what you need to know about canceled debt and how it will affect your tax preparations.

A Tax Accountant Explains Canceled Debt

What is Canceled Debt?

Canceled debt is when the money you owe is forgiven or discharged before the full amount is paid back. This can happen if you’re receiving an inheritance or getting your student loans forgiven after working in a certain profession for a length of time. The bottom line: You owed money, but no longer have to pay the rest of the debt off.

Is It Taxable?

This depends on why your debt is canceled. Typically, the sum of canceled debt is taxable, so you must include it on your tax returns for the same year it is forgiven. But, there are types of canceled debt that are not taxable, meaning you won’t have to include it as part of your gross income. The IRS lists items that are excluded from being taxed on their website.

What Do I Do If I Have Canceled Debt?

It’s best to go straight to a tax accountant to get expert advice and ensure you’re making the right choices when it comes to your tax preparation. They’ll be able to walk you through your available options and guide you through your taxes, so your return is as accurate as possible.

If you’re searching for a tax accountant, give the friendly team at Sharrard McGee & Co PA a call to set up an appointment. You can reach the High Point offices at (336) 884-0410 and the Greensboro offices at (336) 272-9777. With hands-on partners and expert accountants, they’re ready to help you. To browse a full list of services, visit their website.