Insolvency worksheet

Insolvency worksheet for canceled debt

Work through the IRS insolvency worksheet to see how much canceled debt may be excluded from income.

Example numbers are filled in. Replace them with yours.

What you owed

Immediately before the debt was canceled, including the canceled debt itself. Lines 1–14.

1. Credit card debt

2. Mortgage(s) on real property

3. Car and other vehicle loans

4. Medical bills owed

5. Student loans

6. Accrued or past-due mortgage interest

7. Accrued or past-due real estate taxes

8. Accrued or past-due utilities

9. Accrued or past-due childcare costs

10. Federal or state income taxes remaining due

11. Judgments

12. Business debts

13. Margin debt on stocks

14. Other liabilities

What you owned

At fair market value immediately before the cancellation. Lines 16–36.

16. Cash and bank account balances

17. Real property, including the value of land

18. Cars and other vehicles

19. Computers

20. Household goods and furnishings

21. Tools

22. Jewelry

23. Clothing

24. Books

25. Stocks and bonds

26. Investments in coins, stamps, paintings, or other collectibles

27. Firearms, sports, photographic, and other hobby equipment

28. Interest in retirement accounts

29. Interest in a pension plan

30. Interest in education accounts

31. Cash value of life insurance

32. Security deposits with landlords, utilities, and others

33. Interests in partnerships

34. Value of investment in a business

35. Other investments

36. Other assets not included above

Canceled debt

Usually the amount on Form 1099-C.

Line 15: total liabilities: $29,000
Line 37: total assets: $16,500
Line 38: amount of insolvency: $12,500

May be excluded

$8,000

May count as income

The exclusion is claimed on Form 982 with your tax return. A tax professional can confirm how the rules apply to you.
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How this works

This follows the Insolvency Worksheet in IRS Publication 4681 (2025), lines 1 to 38.
You were insolvent to the extent your total liabilities were more than the fair market value of all your assets immediately before the debt was canceled.
Canceled debt is excluded from income only up to the amount you were insolvent; the rest may still count as income.
Enter values as of immediately before the cancellation, including retirement accounts and the debt that was canceled.
The exclusion is claimed on Form 982 with your tax return. This is an estimate, not tax advice.

Sources

Awaiting expert reviewPreview build. Estimates only; not financial, tax or legal advice.

Common questions

What does insolvent mean for canceled debt?

You were insolvent to the extent your total liabilities were more than the fair market value of all your assets immediately before the debt was canceled (IRS Publication 4681).

Do retirement accounts count as assets?

Yes. The IRS worksheet lists your interest in retirement accounts and in a pension plan as assets (lines 28 and 29).

How do I claim the exclusion?

You report it on Form 982 with your tax return. A tax professional can confirm how the rules apply to you.

When would I get a Form 1099-C?

A lender that cancels $600 or more of a debt generally files Form 1099-C for it.

Is the information I enter saved or sent anywhere?

No. What you type stays on this page. It isn't saved or sent anywhere, and it clears when you leave or reload the page.