Private student loans forgiven, received 1099C forms, how does American Rescue Act work?

[Rborg12]

Hello,

I was shocked to find out discover student loans had been forgiven back in October without any real reason. But I received a stack of 1099-C forms for each forgiven loan. Under the American rescue act I live in a state that doesn’t require taxes to be paid on forgiven loans. 

When filing my taxes, do I just not apply those forms? What do I need to do? I certainly cannot afford the tax bomb this will give me if I have to pay any taxes on a $150,000 loan.

Thanks!

[Vanessa A]

The loans are not considered taxable income so you do not need to include the 1099-C on your return. 

The American Rescue Plan Act includes a provision temporarily modifying the tax treatment of forgiven or discharged student loan debt. Specifically, the law excludes from gross income any qualifying student loans that are discharged between Dec. 31, 2020, and Jan. 1, 2026. During this period, forgiven student loan debt won’t be subject to federal taxation. How will a student loan payment count adjustment affect my taxes?

[LindseyS]

Hi there!

Just wanted to double confirm here. If the private student loan company discharged the student loan in 2024 and issued a 1099-c, we should not report this in our TurboTax filing in any capacity, correct?

Thank you for your guidance!

[BrittanyS]

Yes, that is correct.  According to the IRS, "Certain student loan discharges after December 31, 2020, and before January 1, 2026" are exempt from income.  The IRS only requires you report the taxable portion of any canceled debt on your tax return.

• Cancelation of Debit

@LindseyShea 

[dbgrdpg075]

Would that work if you have your loans forgiven by the rescue plan and it says not taxable income in the letter. I contacted my loan servicer and they said they only send a 1099-c out on taxable income. Mine wasn't so no form. Would I need this form for federal and state? I'm in New York, and researching they did pass legislation last year. I was asking if a) does NY consider it taxable or not for the past year's taxes and if not, and b) do I need the forms 1099-c and 982 or I do not need them?

[BrittanyS]

No, New York does not consider Student Loan Forgiveness taxable income.  Per the New York Department of Financial Services, "Any amount forgiven is not considered income and is therefore tax-free"  

Since New York and the IRS do not consider student loan forgiveness as taxable income, you do not need the 1099-C or 982.  

See the link below for more information:

• Student Loan Forgiveness

@dbgrdpg075 

[ljs9249]

Hello, sorry if this is redundant. I received a 1099-c from Discover as they are no longer doing student loans. I'm just not sure if it's considered "forgiven" or how do I know if it's a "certain" student loan? I'm also in NY. Thank you for your help!

[BrittanyS]

Neither the IRS nor New York considers Student Loan Forgiveness as taxable income.  Many private student loan lenders do not include the cancellation of debt as a part of the forgiveness program.  The American Rescue Plan excludes student loan forgiveness for a private lender if your lender categorizes debt cancellation as student loan forgiveness.  You will need to contact your lender for more information.

See the information below provided by Discover:

• Student Loan Forgiveness

@ljs9249 

[N_Br0wn]

I’m also in NY and received a 1099-C from Discover. According to the ARPA, it shouldn’t be considered taxable income. Furthermore, on the IRS website about 1099-C — it states: 

“Special rule for student loan discharges for 2021 through 2025.

The American Rescue Plan Act of 2021 modified the treatment of student loan forgiveness for discharges in 2021 through 2025. Generally, if you are responsible for making loan payments, and the loan is canceled or repaid by someone else, you must include the amount that was canceled or paid on your behalf in your gross income for tax purposes. However, in certain circumstances, you may be able to exclude this amount from gross income if the loan was one of the following:

• A loan for postsecondary educational expenses.

• A private education loan.

• A loan from an educational organization described in section 170(b)(1)(A)(ii).

• A loan from an organization exempt from tax under section 501(a) to refinance a student loan.”

and this is from a private education loan. Therefore, based on everything I’ve been reading, this 1099-C from Discover is non-taxable income federally and for those in NY, stately. 

[mmcdermott92]

I am resident of PA, so I believe this is also non-taxable as they treat cancellation the same as federal. Is this correct?

[AmyC]

There are several types and programs. In general, the private loan forgiveness is still taxable. I do see house bills in progress. 

PA DOR states:

Cancellation of Debt Incurred as Student Loans
If all or a portion of your student loans are paid for by a third party or cancelled, the payment or cancellation is taxable if it falls within one of Pennsylvania’s eight classes of taxable income. Cancellation of a student loan can also be taxable if the student provides services to the lender in exchange for the services. State and Federal programs exist that provide for the payment or cancellation of student loans when the student works for a period of time in a specific profession. Generally, such loan payments or cancellation are not subject to Pennsylvania personal income tax unless the student provides services directly to the payor or lender in exchange for the cancellation. For more information, refer to Personal Income Tax Bulletin 2009-02 – Cancellation of Personal Indebtedness [PDF](opens in a new ta....

Tax Forgiveness | Department of Revenue states: 

Will loan forgiveness apply to private student loans?

Unlike federal student loans, private loans are not covered by student loan forgiveness plans.

PA House states: For those who qualify under various federal programs, Pennsylvania law does not specifically exempt student loan forgiveness from the personal income tax.

[p_santos]

I also received a 1099c from Discover and live in CA. Would this be tax exempt based on ARPA? 
Also wondering why they would send 1099c if we wouldn’t be taxed on the amount? 

[AmyC]

1. If the 1099-C is for student loan debt, then it would be tax exempt federal. CA starts with the federal AGI and does not say to adjust for them amount in CA income.

2. The IRS requires a 1099- be sent once it reaches an income point. The rules for claiming the income have temporarily changed while the rules for reporting it /issuing have not changed. The company does not want to be fined, so you get the form.

[p_santos]

Can you clarify #1 please? 

[DawnC]

You do not have to enter it; keep it with your tax records.  @p_santos    You do not have to add it to your CA tax return or your federal return.