Internal Revenue Service United States Department of the Treasury
Level Basic Advanced Military International

Cancellation of Debt (COD)

Cancellation of Debt—Principal Residence

Exclusion Limit

The maximum amount that can be treated as qualified principal residence indebtedness is $2 million ($1 million if Married Filing Separately). The basis of the taxpayer's principal residence is reduced by the excluded amount, but not below zero.

The exclusion doesn't apply to the discharge of a loan if the cancellation was because of services performed for the lender or any other factor not directly related to a decline in the value of the residence or the taxpayer’s financial condition.