Student Loan Forgiveness

Forum|Forum|3 years ago
October 1, 2022
14 replies
54 views

It is my understanding that debt forgiveness is taxable income.

However I thought that student loan forgiveness was not taxable income.

I went on line to check this out aand the reponse I got was very confusing.

They said generaly it is not taxable but under certain circumstances it might be but does not say what those circumstances are.

Anyone have a clearer answer?

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Lord Happy

Level 5

Happy day...I agree that the guidance is still yet being developed, but it appears that if the loans were federal and stayed federal, that the forgiveness amount won't be taxable. If someone is worrying, I would smile politely and simply ask them if they would be happier paying $10k, or the tax on $10k. Nod knowingly, pat their forearm and tell them that a lot of procedures have to be settled out and get back to enjoying life.

qbteachmt

Level 15

"Anyone have a clearer answer?"

Search on ARPA and Student Debt...

https://www.cnbc.com/select/states-waiving-taxes-for-student-loan-debt-forgiveness/

"In March 2021, President Joe Biden signed the American Rescue Plan into law, which included a clause regarding student loan forgiveness saying that any federal student loans that were discharged between 2021 and 2025 would not be considered taxable income — in terms of federal taxes."

https://www.journalofaccountancy.com/news/2021/dec/lenders-should-not-report-student-loans-discharged-under-arpa.html

When ARPA came out, it revealed the intention for some federal forgiveness action. That's why it was in the news all this time as "potential."

States will vary...

https://www.cnbc.com/2022/09/08/you-may-owe-taxes-for-federal-student-loan-forgiveness-in-these-states.html

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IRonMaN

Level 15

"Anyone have a clearer answer?"

Federal - not taxable

State - maybe - depending on the state.

How can you get any clearer than that 😉

Slava Ukraini!

R

rcooley25Author

Level 7

This is why you cant believe some of the things you read on the internet.

The way you put it it is very clear.

However I would like to vent may anger over this ruling as being nontaxable.

Any of us who have ever had a debt forgiven has had to pay income taxes on it. Why should these students get off scott free? A person who has a credit card debt of 600.00 forgiven has to pay income taxes on it. Why should someone who has $10000.00 in debt cancelled not have to pay taxes on it.

Ooops I stand corrected. Jesus did not charge me for his paying my debt.

qbteachmt

Level 15

"Why should someone who has $10000.00 in debt cancelled not have to pay taxes on it."

The taxpayers guarantee Federal student loans, so the colleges can raise their charges. The Feds offer loan forgiveness for public service and other qualification, and now at a base level, which is what the taxpayer was already on the hook for, anyway. Instead of making good education available on a wider basis, we run the money in circles. In our region, there was a study that figured out a dollar will circle through 7 steps before it's all used up.

It's the circle of life.YMMV

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