CHARLOTTE, N.C. — As millions of Americans are getting their student debt wiped out, many people are surprised to learn they could owe taxes for any debt that's forgiven.
Debt relief attorneys told CNBC that Americans will be required to pay tax on any forgiven debt over $600. They said it's because most canceled debt is taxable. If you have student debt canceled, you will be required to file what's known as a 1099-C form with the Internal Revenue Service (IRS). That form will include all of the details about the settled debt amount.
Additionally, the form identifies the settled money as income, meaning you'll have to pay income taxes on it. Even still, tax experts agree that in most cases, paying taxes on debt relief is better off than paying the full sum of the debt.
There are a few possible exceptions that cover certain types of student loans. The exceptions for taxable student debt relief seem to typically be limited to doctors, nurses and teachers, especially if they're serving in rural or low-income areas.
WCNC Charlotte is always asking "where's the money?" If you need help, reach out to WCNC Charlotte by emailing money@wcnc.com.
As for how this shows up on your credit report, tax attorneys say there are very few details offered on your report detailing what your settled debt is. So if you're looking for a job and a potential employer pulls your credit report, they won't have access to those details.
Contact Kia Murray at kmurray@wcnc.com and follow her on Facebook, X and Instagram.