Many students face strong student loan balances
after they graduate. Many people have considered student loan forgiveness to avoid having
To pay off your loans. However, most people who opt for this do not know that student
Loan forgiveness can affect your taxes. It is a good idea to understand how
forgiven student loans affect your taxes so you don't be surprised with an extra
Taxes you must pay.
I may have to pay
Taxes on student debt forgiven
There are many payment plan options for student
loans These payment plans can facilitate the payment of student loans in your
finance. Student loan payment plans work by limiting your monthly payments at
around 10% to 15% of your income. Generally pays between 10 and 25 years, depending on
which option you choose Any remaining balance after your repayment period ends
There is an essential
factor that you should keep in mind that you hardly ever discuss when it comes to
student loan forgiveness: under the recent Internal Revenue Service (IRS)
rules, many student loans forgiven under one of these reimbursement programs are considered taxable income.
This rule means that you could end up with a
Substantial tax bill if your student loans are considered taxable income. When
This happens, the lender sends you and the IRS a 1099-C tax form. This tax form
Report the amount of the forgiven student loan debt and apply a tax. So,
While you may not have to pay the full amount of student loans, it still ends
have to pay taxes on the remaining balance.
If you get a 1099-C tax form for a forgiven student
loans, then you can consult a qualified tax professional for help
Understand how this affects your taxes.
Another important tax
Here are some things you should know about how
Student loans affect your taxes:
There are limited taxes.
advantages to pay off your student loans. You will not get a
great tax exemption, but you may be able to deduct part of your student loan
Interest on your taxable income.
If you are struggling to pay someone else
Student loan debt, you can still claim interest as a tax
deduction because you are the one who makes the payments.
Your federal income tax refund could be lost
If you don't pay your loans. If default on
your student loans, up to 100 percent of your federal repayment could be used to offset your student loan debt. This means
You will not see your tax refund. The majority
borrowers try to pay off their student loan debt over the years, but some
don't do it about 11% of delinquent borrowers.
You may be able to claim an exemption or exclusion. meExemptions and exclusions for the cancellation of student loans are very limited. However, you may be able to
Claim an exclusion if you become insolvent in your debt.
Insolvency can usually be claimed if you cannot
Pay off the debt just before it is canceled. If this happens, you could be
able to exclude the amount of debt from your taxable income.
Forgiveness for death and disability is excludable. Due to the recent tax reform, if a
the borrower dies or becomes permanently disabled before he can pay
your student loans, those loans can be forgiven.
This tax reform is designed to prevent the family
Members being responsible for paying huge taxes on student loans.
No matter how much you have taken out in student loans, you should know what your options are and how they can affect your taxes. If your credit has been damaged due to student loans, call the Lexington Law Firm credit specialists for a free personalized credit consultation. For more than a decade, we have worked to help more than half a million customers eliminate millions of negative, inaccurate and unverified items from their credit reports.