Student Loan Forgiveness

Forum|Forum|2 years ago
October 25, 2023
2 replies
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Hello. My student loans have all been forgiven, based on the number of years they have been active (over 25 years) My loan account is at zero, and I have confirmation that the loan account has been closed.

I also received a student loan refund check, which I am assuming is for overpayment, over the last many years. What are the tax implications? Should I be prepared to owe anything when I complete my taxes for 2023?

I know that federal taxes are being waved for any forgiveness amounts. But what about the refund amount?

Ask the Experts - Extension - Sept 2023

Andrew_W

Employee Tax Expert

Hi lojack8969,

As you've indicated, student loan debt cancellation is generally not taxable through the end of 2025, due to the American Rescue Plan Act. This can vary on the state level however. Some states still tax cancellation of student loan debt as income.

A refund of payments made is generally not considered income, so would not be taxable.

Here's some additional information about student loan forgiveness: https://turbotax.intuit.com/tax-tips/college-and-education/can-debt-forgiveness-cause-a-student-loan-tax-bomb/L4hoHzaq2

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lojack8969Author

Level 2

Thank you Andrew.

I have done some research and it appears that New York is currently not one of the states that is taxing loan forgiveness. What documents will I need form my Loan Provider (Nelnet) when completing my taxes. Is there any way to find out now if I will owe any taxes on that amount? I just want to be prepared to pay if that will be required.

Andrew_W

Employee Tax Expert

Hi @lojack8969,

There is no tax in the scenario you've described, since student loan forgiveness is not taxable through 2025. Your loan servicer may issue form 1099-C, but you would not need to include that as income on your return in this case.

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JK888

Level 2

I live in California and my student loans were forgiven in the first round in 2023 of Bidens relief. My loan servicer told me that they will definitely not be issuing 1099cs so I am confused as to whether I have to enter anything in my California tax return. I can't find anything online but supposedly there is a bill AB111 that the governor signed that pertains to this but I am very confused and don't want to owe anything if I do not include my forgiven loan in my California taxes. What do I do? The franchise tax board could not answer any questions about this when I called to ask.