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Respite from Education Loan Debt: Which Are The Tax Implications?

Thursday, September 24th, 2020

View All | June 2016 Newsletter Edition

Today’s college pupils usually leave college by having an overwhelming level of financial obligation. In certain cases, figuratively speaking are released (also called being terminated or forgiven). In other instances, these loans are paid down by the company. Both actions have tax effects for the learning education loan borrowers. We’ll give an explanation for tax implications, but first, let’s cover some necessary back ground information.

Cancellation of Debt Tax Basics

For federal income tax purposes, the typical rule is a taxpayer’s gross income includes any termination of financial obligation (COD) income — unless one of many tax-law exceptions relates. The accessibility to exceptions (found in Section 108 regarding the Internal income Code) is dependent on different facets like the utilization of the loan proceeds in addition to borrower’s condition that is financial the time the “COD event” happens. (more…)