Student loan discharge/Taxes

Student loan discharge/Taxes

gerimiles17
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Joined: 14 Nov 2017, 20:09

14 Nov 2017, 20:11 #1

Hi everyone, I was recently awarded 100%T&P disabled, my question is..... I also just sent in my paperwork to have my student loans discharged. Has anyone had them discharged and what happened for taxes? I know you have to report it, I'm terrified Im going to have to pay a ton in taxes. Thanks in advance!
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DDDman
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Joined: 12 Aug 2008, 01:54

15 Nov 2017, 03:00 #2

I had mine discharged, and yes they are considered income as of now.  I owed something like 80,000, paid 17,000+ in taxes.
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Gade757
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Joined: 06 Sep 2017, 04:33

15 Nov 2017, 14:22 #3

DDDman wrote:I had mine discharged, and yes they are considered income as of now.  I owed something like 80,000, paid 17,000+ in taxes.
Make sure you file for insolvency to show that you make less than what forgivin.It can be wavied.

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Nick
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Joined: 27 Feb 2011, 02:04

15 Nov 2017, 16:55 #4

Insolvency does not relate to how much you make  directly - it  means your total liabilities are more than your total assets. You have to be insolvent immediately before your loans are forgiven. If the insolvency amount is greater than the student loan debt forgiven, then the cancelled debt income ( the amount reported on the 1099C) can be excluded from tax calculation.. But if the insolvency amount before forgiveness is lower than the forgiven debt, then you can reduce the 1099C  income by the amount of the insolvency and the remainder must be reported as income.

See IRS puyblication 4861 - https://www.irs.gov/publications/p4681#en_US_2016_publink1000192033  and the insolvency worksheet.
Nick
USAF RETIRED
100% P&T
100% CRSC

Complete layman - not a VSO and not a VA employee.
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Gade757
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Joined: 06 Sep 2017, 04:33

16 Nov 2017, 12:13 #5

Nick wrote:Insolvency does not relate to how much you make  directly - it  means your total liabilities are more than your total assets. You have to be insolvent immediately before your loans are forgiven. If the insolvency amount is greater than the student loan debt forgiven, then the cancelled debt income ( the amount reported on the 1099C) can be excluded from tax calculation.. But if the insolvency amount before forgiveness is lower than the forgiven debt, then you can reduce the 1099C  income by the amount of the insolvency and the remainder must be reported as income.

See IRS puyblication 4861 - https://www.irs.gov/publications/p4681#en_US_2016_publink1000192033  and the insolvency worksheet.
Gade757 wrote:
DDDman wrote:I had mine discharged, and yes they are considered income as of now.  I owed something like 80,000, paid 17,000+ in taxes.
Make sure you file for insolvency to show that you make less than what forgivin.It can be wavied.

Sent from my SM-G950U using Tapatalk
gerimiles17 wrote:Hi everyone, I was recently awarded 100%T&P disabled, my question is..... I also just sent in my paperwork to have my student loans discharged. Has anyone had them discharged and what happened for taxes? I know you have to report it, I'm terrified Im going to have to pay a ton in taxes. Thanks in advance!
Heres the Insolvency Clause
Calculator

Find out if you qualify to avoid paying income tax on your forgiven debts through the Insolvency Clause.


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EDIT BY MODERATOR:  Members can PM the poster if they want the link to the referenced calculator.  The link has been removed as it is to a commercial law firm website
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