Tax Relief for Discharged or Forgiven Student Loans

The tax landscape for student loan forgiveness is constantly shifting.  Earlier this year we blogged about disability discharges of federal student loan debt no longer considered taxable.  Discharges in bankruptcy for either federal loans under a Brunner challenge or non-qualified private student loans that don’t meet the definitions for discharge protection are both non-taxable events.

The Public Service Loan Forgiveness program for federal loans also provides a tax free total forgiveness after ten years of qualifying payments.  Talk to us if you have questions about whether your loans qualify, your employment qualifies, or your payments qualify.  There are sticky questions that may prevent relief after years of payments if done wrong.

The IRS also allows for tax relief for taxpayers who took out federal student loans for attendance at Corinthian Colleges and other schools owned by American Career Institutes (ACI) and were granted a discharge under the Defense to Repayment program.

Now Rev. Proc. 2018-39, 2018-34 IRB extends tax relief to taxpayers who took out private student loans to attend schools owned by CCI or ACI.

If you receive a 1099 for forgiven student loan debt be sure to read up on the new regs or hire a tax professional (I am not a tax professional) to assist in filing your returns that year.  For instance, I received this bulletin about the new IRS reg extending to private loans for those particular schools from my accountant, Kevin Cameron with C&L Value Advisors, LLC located in Tampa, FL.  Thanks Kevin!