Does debt consolidation have to be reported in gross income?
Does debt consolidation have to be reported in gross income?
If someone is paying an 18% tax rate on a credit card debt and then take out a loan to pay off the debt (and pay 10% interest)…does this debt consolidation need to be reported in gross income when filing your taxes?
Best answer:
Answer by wg0z
there is no income here.
Add your own answer in the comments!
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All you are doing is changing creditors.
only if you eventually get a 1099 c would it ever be considered income to you
No. This is not income, taxable or otherwise.
No. Debt that you continue to owe (even if a different loan) is not part of your income. However, if they forgive or cancel any of the debt, you do have to report that in gross income.
No, debt consolidation at a reduced interest rate doesn’t need to be reported as income. It’s the same as if you refinanced your mortgage at a better rate. You wouldn’t owe any taxes just because you got a lower rate.
You only have a tax liability on any FORGIVEN portion of the debt you owe. You would receive a 1099 form from the creditor if you were in this position.