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Category: General Questions

What is a "discharge of qualified principal residence indebtedness"?

“Qualified principal residence indebtedness is any mortgage you took out to buy, build, or substantially improve your main home. It must be secured by your main home. Qualified principal residence indebtedness also includes any debt secured by your main home that you used to refinance a mortgage you took out to buy, build or substantially improve your main home, but only up to the amount of the old mortgage principal just before the refinancing.” (IRS Publication 4681)

Per Publication 4681, “If your debt was discharged after 2016, you can't exclude it from income as qualified principal residence indebtedness unless the discharge is subject to an arrangement that was entered into and evidenced in writing before January 1, 2017. Part or all of your debt may still qualify for one of the other exclusions.”

 

Other exclusions must be applied before the qualified principal residence indebtedness exclusion. This exclusion doesn't apply to a cancellation of debt in a title 11 bankruptcy case. If qualified principal residence indebtedness is canceled in a title 11 bankruptcy case, you must apply the bankruptcy exclusion rather than the exclusion for qualified principal residence indebtedness. If you were insolvent immediately before the cancellation, you can elect to apply the insolvency exclusion.”

 

To enter Form 982 in the program, go to:

1. Federal Section

2. Income

3. Enter Myself

4. Other Income

5. Cancellation of Debt Form 1099-C, Form 982

6. Form 982

 

To view a copy of the IRS Form 982 click here.