The IRS has released a list of exceptions for the inclusion of a cancelled student loan debt in income. In the past, if a taxpayer’s student loan been cancelled or repaid by someone else, for tax purposes, they had to include the cancelled or repaid loan amount as part of their gross income. However, the American Rescue Plan Act of 2021 modified the treatment of student loan forgiveness for discharges in 2021 through 2025, allowing taxpayers to exclude the repaid or cancelled loan amount from gross income, if the loan meets one of the following requirements:
- A loan for post-secondary educational expenses
- A private education loan
- A loan from an educational organization described in Code Sec. 170(b)(1)(A)(ii)
- A loan from an organization exempt from tax under Code Sec. 501(a) to refinance a student loan
Taxpayers can find more information about the list of exceptions to canceled student loan debt in income here.