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Old 04-07-2015, 02:26 PM
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Cancellation of debt - debt was from family business

Hello,

We had a family business that went under, Unfortunately I was the one that had used my personal credit to get lines of credit and a business credit card that everyone used for materials/fuel etc.

After the business failed we still owed 25k on the card, I could not pay this so after many years of working with them I settled for less and slowly and painfully paid it off.

Now I get a large cancellation of debt and when I put it into my taxes it significantly raises my amount due.. It looks like it puts me into a higher bracket and also takes away some other deductions such as child tax credit.

Is there anything I can do to not claim this as income since it really wasn't my income?

Thanks in advance.



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Old 04-08-2015, 08:57 PM
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Now I get a large cancellation of debt and when I put it into my taxes it significantly raises my amount due.. It looks like it puts me into a higher bracket and also takes away some other deductions such as child tax credit.===>.Correct; The child tax credit is gradually reduced based on your income for the year. The child tax credit starts to be reduced when income reaches:$55k for married couples filing separately,$75k for single, head of household, and qualifying widow(er) filers, and$110k for married couples filing jointly. In the phaseout range, the child tax credit is reduced by $50 for each $1,000 of income above these threshold amounts.

Is there anything I can do to not claim this as income since it really wasn't my income?===>Sorry but not that I know of; as you can see, you must include the canceled amount in gross income unless you meet an exclusion or exception. Canceled Debt can Qualify for EXCLUSION from Gross Income: if the Debt canceled in a Title 11 bankruptcy case; the Debt canceled during insolvency; if it is a Cancellation of qualified real property business indebtedness; Cancellation of qualified principal residence indebtedness.



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