Question

How much tax is charged on a credit card settlement?

Forum|Forum|7 years ago
June 6, 2019
1 reply
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I want to ask my credit card for a settlement to get a reduced amount and then just pay off in one lump sum. I understand I must claim the written off amount as income. Was is the percentage tax on the written off amount?

MichaelL1

Employee

The credit card company will issue a 1099C for the amount written off.

This is taxed as ordinary income.

So for example, if you were in the 15% tax bracket for 2016, and income is expected to stay close to same, then the amount written off would be taxed at 15% (so $10,000 would be $1,500 tax).

The tax brackets are listed below and may help you in determining what tax bracket you are in.

https://www.irs.com/articles/2016-federal-tax-rates-personal-exemptions-and-standard-deductions