A small but important provision in the stimulus package signed by President Biden will temporarily exempt canceled student loans from taxes, a move that could make it easier for Biden to write off some student debt.
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Student Loan Forgiveness Won’t Increase Your Tax Bill
President Biden campaigned on a pledge to forgive $10,000 in student loan debt, but it was unclear whether the canceled loans would be taxable. Usually, with some exceptions, if a student loan is forgiven, canceled, or canceled for less than the amount you owe, the amount of the canceled debt is treated as taxable income in the year of cancellation.
Federal student loan borrowers under income-oriented repayment plans can have their loan balances forgiven after making payments for 20 to 25 years.
Tax relief for canceled student loan debt also includes private student loans
Tax relief on canceled student loan debt is temporary
Unless Congress extends it, the student debt forgiveness tax relief expires at the end of 2025.