Is the amount of the discharged loan listed on the state tax return to reduce taxable income? If that is the case, should the amount of the loan be stated on the notice given to the taxpayer? We are confused if we need to put the total amount of the discharged loan on return, that could result in a taxable income of zero. Please clarify.
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Normally a discharged debt is ADDED to your taxable income, unless the loan was discharged for death or disability.
If this is the case, you will receive a 1099-C that you don't need to enter in TurboTax; just keep it for your records. Your discharged debt will not be considered taxable income.
Click this link for more info on Discharged Student Debt
Turbo tax is asking for the amount of discharge student loan indebtedness amount on the Maryland State Income Tax Return. I was allowed a credit of $1000.00. Is that the amount of the allowed discharged loan and not my total amount of your school loan debts?
Don't put anything about 'discharged student loan debt' in your Federal return and Maryland won't ask for it.
You don't get a CREDIT for discharged debt. The $1000 credit you are referring to must be for something else; did you make Student Loan Payments? Or have Education Credits?
I am in the same situation. Maryland DID ask for the amount of loan forgiveness. I am trying to figure out what I should do.
This is the prompt using turbotax for the state of maryland: "The amount of discharged student loans can be subtracted from your Maryland income."
This is the answer within turbotax for the state of maryland:
"When would discharged student loan indebtedness apply?
It applies more broadly now, after Maryland removed the requirement the discharge must be due to total and permanent disability or death. To qualify for the subtraction modification, an individual must attach a copy of the notice stating the loans have been discharged with the tax return."
Why wouldn't I report the forgiven loans?
The bill states:
"Altering a subtraction modification under the Maryland income tax for specified income of specified individuals resulting from the discharge of student loan indebtedness"
The subtraction would only apply if the debt forgiveness resulted in reported INCOME on your Federal return.
If the forgiven debt is not ADDED to your Federal income, do not subtract from your State income.
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