Every consideration from suspending payments to outright forgiveness is being discussed in the halls of Congress and the White House. This topic is widely impactful as a recent Forbes article sites current student loan debt in the Unites States tops a record $1.7 trillion amongst 45 million borrowers. So, what is the law today for how loans are handled in the wake of COVID-19, and what might the tax and financial landscape look like if loans are forgiven? Today, we offer a primer on this very question and its possible outcomes.
Maybe this will put precedence towards the taxability of forgiven student loans
As part of the CARES Work introduced during the , and extended of the Chairman Biden’s Exec Purchase in , federal education loan repayments (dominating, desire, and you may range action) was basically frozen/suspended (called forbearance) due to . This can have no taxation effects for college students/individuals due to the fact mortgage is not cancelled, it’s just delay, additionally the borrower however must pay the mortgage.
If the taxpayer Paid back student loan interest in 2020, it would be deductible (if the taxpayer’s income is below certain thresholds). Here is an excerpt from the IRS Website on Student Loan Interest:
Student loan notice try interest your paid back into the seasons into a professional education loan. It provides both needed and you will willingly pre-paid back attract repayments. You ount interesting you really paid within the 12 months.
Within the a recently available Florida case of bankruptcy legal proceeding ( Mallett, (Bktcy Ct Florida 2021) 127 AFTR 2d 2021-540) , a knowledge financing are low-dischargeable inside the case of bankruptcy. More…
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