A small but important provision in the stimulus package signed by President Biden will temporarily exclude canceled student loans from taxes, a move that could make it easier for Biden to write off some student debt.
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President Biden campaigned to pledge to write off $ 10,000 in student loan debt, but it was not clear whether the canceled loans would be taxable. Normally, with a few exceptions, if a student loan is canceled, canceled, or discharged for less than the amount you owe, the amount of forgiven debt is treated as taxable income in the year of cancellation.
Federal student loan borrowers under income-based repayment plans are eligible for loan balances forgiven after making payments for 20 to 25 years.
Tax relief is not limited to federal student loans. If your private lender cancels some or all of your student loan debt, you also won’t have to pay tax on those canceled loans.
Unless Congress extends it, the student loan debt forgiveness tax break expires at the end of 2025.