Mississippi plans to tax student loan forgiveness

[Acer]

Perhaps some can apply the forgiveness against interest that has been paid or accrued. Generally expenses, of which interest is one, at least on a schedule C for example; are deducted against receipts before gain is computed.

[vision63]

Man, I'd need to sit down with a glass of water to think about it.

[mattkime]

Oh, it should be mentioned that this is often a factor in existing loan forgiveness programs.

Lets say you go to law school and decide to work as a public defendant and have $200k in loans (is that too low??). You work for 10 years and the loans are forgiven. Now you get a tax bill at about 35% because you had a $200k windfall when your loans were forgiven. Can you afford the $70k tax bill? Of course not, now you're on a payment plan with the IRS.

[JoeH]

mattkime wrote:
Oh, it should be mentioned that this is often a factor in existing loan forgiveness programs.

Lets say you go to law school and decide to work as a public defendant and have $200k in loans (is that too low??). You work for 10 years and the loans are forgiven. Now you get a tax bill at about 35% because you had a $200k windfall when your loans were forgiven. Can you afford the $70k tax bill? Of course not, now you're on a payment plan with the IRS.

Except your example is one that already is exempt from the loan forgiveness being considered taxable. A public defender would be working for a government agency, if they fulfill the requirements of making their necessary payments for 10 years, the balance cancelled under the Public Service Loan Forgiveness program is not considered taxable by the IRS.

[mattkime]

JoeH wrote: the balance cancelled under the Public Service Loan Forgiveness program is not considered taxable by the IRS.

Huh, I wonder if that changed since I looked at this about 10 years ago. Anyway, glad to see they made that change.