Taxes and medical debt relief.
A debt cancelled as a gift is, in most cases, not taxable income (IRS Publication 4681). Our own position is being reviewed by tax counsel. Talk to a tax professional if you are unsure.
Last updated .
Key facts
Cancelled debt and income tax
- What it says
- Canceled debt is generally taxable income, but in most cases not when the debt is canceled as a gift; insolvency can also exclude canceled debt (Form 982).Talk to a tax professional if you are unsure.
- As of
Who must file Form 1099-C
- What it says
- $600Talk to a tax professional if you are unsure.
- As of
| Fact | What it says | Applies to | Source | As of |
|---|---|---|---|---|
| Cancelled debt and income tax | Canceled debt is generally taxable income, but in most cases not when the debt is canceled as a gift; insolvency can also exclude canceled debt (Form 982).Talk to a tax professional if you are unsure. | |||
| Who must file Form 1099-C | $600Talk to a tax professional if you are unsure. |
If your medical debt is cancelled
When a lender forgives a debt, the IRS usually counts the amount as income. A debt cancelled as a gift is different: in most cases it is not taxable income Source 1. Being insolvent, which means owing more than everything you own is worth, can also keep cancelled debt out of your income. The IRS explains both in Publication 4681.
Who sends Form 1099-C
Form 1099-C reports a cancelled debt to the IRS and to the person who owed it. The IRS requires it from banks, credit unions, certain federal agencies and organizations whose main business is lending money, for cancelled debts at or above the amount shown in the key facts above Source 2. An organization that buys medical debt and cancels it is not clearly one of these.
Our position on Form 1099-C
Our Form 1099-C position is being reviewed by tax counsel and will be published here before our first purchase. We have not bought or cancelled any debt yet, so no one has received a form from us.
If a Form 1099-C arrives
Don't ignore it. Ask the sender why they sent it, keep the letter that says your debt was cancelled, and talk to a tax professional about whether the gift rule or insolvency applies to you.
If you give
The Medical Bill, Inc. is incorporated. Our federal tax-exempt status is not confirmed yet, so gifts may not qualify for a federal income tax deduction.
Tax deductibility outside the United States depends on your local law.
This sentence changes on its own when our status changes, here and on every receipt.
- Receipts. When giving opens, every gift gets a numbered receipt that shows our legal name, the amount, the date and the sentence above. Each January we also send a statement of your gifts for the year before.
- No goods or services. Every receipt will say that you received nothing in return for your gift.
- Monthly gifts. Each charge gets its own receipt.
Our donation terms have the details.
When to talk to a tax professional
Talk to a tax professional if you are unsure, and especially if:
- you received a Form 1099-C for a medical debt;
- you were insolvent when a debt was cancelled;
- the debt was for a business, or was cancelled by a lender;
- you want to know how a gift affects your own taxes.
Free help may be near you: the IRS Volunteer Income Tax Assistance program offers free tax help at local sites, mainly for people with low to moderate incomes.
Next step
If you need help with your own situation, these can help:
Sources
Note 1 IRS Publication 4681 (2025). Published 2025. Talk to a tax professional if you are unsure. Last checked November 2, 2026.
Note 2 IRS, Instructions for Forms 1099-A and 1099-C. Published April 2025. Talk to a tax professional if you are unsure. Last checked November 2, 2026.
Note 3 Free tax return preparation for qualifying taxpayers. Internal Revenue Service. Checked November 3, 2026.
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