is cancellation of debt taxable in north carolina
However, the state considers this cancellation of debt taxable income on which North Carolina income tax must be paid. For a full list of changes, please review the North Carolina Notice dated April 1, 2015 found at this link: http://www.dor.state.nc.us/taxes/impactofcodeupdate040115.pdf.s such, educational expenses deducted from the federal return will be subject to North Carolina income tax. Cancellation of Debt Related to Home. In many cases, individuals who had lost their primary homes had their mortgage debt canceled.