CHARLOTTE, N.C. — Tax season is officially here and whether you already filed, just started or are waiting until April to even look at them, chances are you have some questions about credits, deductions and other factors that could influence your 2024 tax refund.
One of the biggest questions is about student loan forgiveness and how it will impact your taxes. The Biden administration recently announced it will start notifying borrowers that their loans have been canceled as part of a new repayment plan. So far, the White House says it has approved nearly $138 billion in debt relief for around 3.9 million Americans.
So what does it mean for your taxes? Are forgiven loans considered taxable income? Verify viewer Eric W. sent an email asking that very question, asking the following.
"As I recall, debt forgiveness is taxable income," he wrote. "Will we receive a 1099 from the federal government for student loan forgiveness?"
THE QUESTION
Do you have to pay federal taxes on your student loan forgiveness?
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THE ANSWER
No, under the American Rescue Plan, you don't have to pay federal taxes on the value of your student loan forgiveness. However, the state of North Carolina does tax student loan forgiveness as income so that you may need that 1099 for your state return.
OUR SOURCES
WHAT WE FOUND
According to the IRS, people will receive a 1099-C form if their credit card or loan debt is forgiven because that is taxable. However, when it comes to student loan debt?
"Student loan tax forgiveness is not taxable from 2018 to 2025 under the American Rescue Plan," Steber said. "So if you got debt forgiven, know that it's not taxable."
However, Steber said you still might get a 1099-C in the mail. It's good to keep it for your records, but remember student loan forgiveness isn't taxable under the American Rescue Plan.
"You may not even get one, but you usually do because they may not have changed all of the reporting," he said. "Most of the time, you may get one."
If you accidentally included canceled debt as taxable income on your taxes, Steber said it's not too late to fix that. However, you may need help from a professional to amend your return.
"If you put it on your tax return, we can see what you did," Steber said. "You have three years to get your money back."
Contact Meghan Bragg at mbragg@wcnc.com and follow her on Facebook, X and Instagram.
WCNC Charlotte's Verify series is all about trying to make a difference in the Carolinas by making sure the community has the correct information. WCNC Charlotte outlines concisely what we know and what we don't know. Sometimes the answer can be surprising. Watch previous stories where we verify social media claims in the YouTube playlist below and subscribe to get updated when new videos are uploaded.