Do I need to claim my student loan refund from the Student Loan Debt Relief Plan as income?

[PattiF · Accepted solution]

The student loan refund is not taxable on your federal return. While all federal student loan forgiveness is temporarily tax-exempt at the federal level, this is temporary under the provisions of the American Rescue Plan Act of 2021. Unless Congress extends those provisions or makes them permanent through new legislation, the tax relief expires at the end of 2025.

Some states are including this as taxable income. 

[raem0702]

thank you for the reply. I live in Minnesota. Will this be taxable income on my 2022 tax return? I recieved the refunds in 2022, but the forgiveness is on hold. So, wasnt sure how that works. Thanks! 

[Hal_Al]

If you claimed the student loan interest deduction, on a previous federal tax return (e.g. 2021), the portion of the refund that is interest, if any, is taxable on your 2022 tax return.

[qcriales]

Just to clarify - if you received the Student Debit Relief Refund because you paid off your student loan during COVID but want to qualify for the forgiveness.... this refund is not considered income that needs to be disclosed? 

[BrittanyS]

A provision in the 2021 American Rescue Plan Act, student loan forgiveness will not be taxable even if you receive a refund for federal tax purposes.

However, some states may require tax to be paid on the canceled loan debt.  Currently, Arkansas, Hawaii, Idaho, Kentucky, Massachusetts, Minnesota, Mississippi, New York, Pennsylvania, South Carolina, Virginia, West Virginia, and Wisconsin have the potential to tax forgiven student loans.  

For more information, see the link below:

Student Loan Forgiveness

@qcriales 

[cmarchet45]

Is this 2022 student loan interest refund income for 2022 and where would that be entered if so?

I  got a new 1098-E for 2021 with 0 interest so I thought we need to now go in and remove the prior claimed interest for 2021 and maybe 2020?

Therefore would need to amend taxes for prior years.

I repaid the interest in 2022 but would not claim it since I already did in prior years.

I have asked about amending the prior years taxes in another post. 

Carol

[KrisD15]

Please clarify, 

Did you claim interest paid in 2021? (Interest was paused on student loans during 2021)

Was the refund for the PRINCIPAL or INTEREST of the loan? 

[cmarchet45]

   The student loan refund (income) which by the way was available due to the covid pause (not to be confused with the debt relief plan that is pending) is nontaxable. If you claimed any student loan interest in previous years that is now refunded, you need to amend those years taxes from what I gather so far. I received more refund than I asked for. The refunded interest is not reportable as 2022 income as also posted from what I've seen by the experts here. My refund did not separate interest out and the payment (s) details were removed from my servicer website appearing as if the payments never happened. You would need to check and see what you claimed for interest in prior years (2020-2021) by comparing what was claimed on your taxes and would have been on your 1098-E at that time (hopefully you have a copy) and what the 1098-E form says now (mine was changed to 0 for 2021 and changed/lowered for 2020). Also, a hint is to look at top 1098-E form and see if it says corrected in box.  Note the difference and we will need to amend the taxes for those years claiming less or 0 interest. I did a quick check (tax redo for 2021) and my tax liability (now additional owed) is $12.00 which may be too low to amend per answers here (not worth the effort by IRS) but not guaranteed and IRS could still do audit based on the corrected 1098-E.

   Also would like to say I paid back a large amount of what was refunded and some interest. I did not plan to claim the interest for 2022 since it was claimed before (before I realized that my prior 1098-E s were changed) and still would not. Wish we knew from beginning that the money was going to be refunded anyway (if passed) but that was not said until 3-4 weeks after the debt relief was announced. Good luck, cmarchet45