QUESTION:
Is student loan debt forgiveness taxable?
ANSWER:
Thanks to the American Rescue Plan Act enacted in 2021, student loan debt forgiveness isn’t considered taxable income on your federal tax return. This exclusion from income is valid for any student loans forgiven in 2021 through 2025. Starting in 2026, the old rules will apply, making student debt forgiveness taxable.
But your state may have different tax rules for student loan forgiveness. Currently, a handful of states consider it taxable income. So, if you have questions about your situation, speak with your tax professional.