If your student loans are forgiven, does that count as taxable income?
Generally, yes. Cancellation of debt is taxable income.
However, there are exceptions.
Section 108(f)(1) of the tax code says that loan forgiveness isn’t taxable when the loan was forgiven because the taxpayer worked for a certain period of time in a certain profession.
Thus, if you have $100,000 of student loans forgiven because you worked as a teacher or for a nonprofit for a certain period of time, your loan forgiveness won’t be taxable.
But if an exception doesn’t apply, and you have $100,000 of student loans forgiven, you’ll have to pay tax on an extra $100,000 of income.
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