Respite from Education Loan Debt: Exactly What Are The Tax Implications?

Respite from Education Loan Debt: Exactly What Are The Tax Implications?

View All | June 2016 Newsletter Edition

Today’s college pupils frequently leave college with an overwhelming number of debt. In certain full situations, figuratively speaking are discharged (also called being terminated or forgiven). These loans are paid off by an employer in other cases. Both actions have income tax effects when it comes to education loan borrowers. We’ll give an explanation for income tax implications, but first, let’s cover some necessary history information.

Cancellation of Debt Tax Basics

For federal tax purposes, the overall guideline is the fact that a taxpayer’s gross income includes any cancellation of financial obligation (COD) income — unless one of many tax-law exceptions pertains. The accessibility to exceptions (present in Section 108 regarding the Internal income Code) is dependent upon different facets like the utilization of the loan proceeds while the borrower’s condition that is financial enough time the “COD event” happens.

Check out of this exceptions: