Forgiven debt is taxable as ordinary income and the lender will send you a form 1099 for it, but in the case of principal forgiveness plans where "you agreed to

Forgiven debt is taxable as ordinary income and the lender will send you a form 1099 for it, but in the case of principal forgiveness plans where "you agreed to a loan provision requiring you to work in a certain profession for a specified period of time, and you fulfilled this obligation," that is not taxable as income. Source: http://www.irs.gov/Individuals/The-Mortgage-Forgiveness-Debt-Relief-Act-and-Debt-Cancellation- http://www.irs.gov/Individuals/The-Mortgage-Forgiveness-Debt...