Relief from Education Loan Debt: Which Are The Tax Implications?
Relief from Education Loan Debt: Which Are The Tax Implications?
View All | June 2016 Newsletter Edition
Today’s college pupils frequently leave college with an amount that is overwhelming of. In certain full situations, student education loans are discharged (also called being cancelled or forgiven). These loans are paid off by an employer in other cases. Both actions have income tax effects for the education loan borrowers. We’ll give an explanation for income tax implications, but first, let’s cover some necessary back ground information.
Cancellation of Debt Tax Basics
For federal income 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 relates. The option of exceptions (present in Section 108 regarding the Internal Revenue Code) hinges on different factors for instance the use of the loan proceeds as well as the borrower’s monetary condition at enough time the “COD event” happens. […]