In some cases, your forgiven debt is taxable – and in some it’s not. When it is taxable nonbusiness debt, you’ll use the copy of the 1099-C to use to report it on Schedule 1 of Form 1040 as other income.
Is discharged student loan debt taxable?
Loan discharges for closed schools, false certification, unpaid refunds, and death and disability are considered taxable income. The forgiveness of the remaining balance under income-contingent repayment and income-based repayment after 25 years in repayment is considered taxable income.
How does a 1099-C affect my tax return?
In short, you’ll have to pay taxes on the extra income. That might mean your refund is reduced or that you owe more taxes than you would otherwise. In cases where the 1099-C canceled debt falls under an IRS exclusion—which means you don’t have to pay taxes on all or some of the income—you still may need to file a form.
How does a 1099-C for student loan debt work?
The 1099-C will report how much student debt was forgiven. First, check this amount against your records. If it’s wrong, contact the creditor, whose contact info will be provided in the form. On the form, box 2 shows you the amount of debt discharged — you’ll need to put that in the “Other income” line on your 1040 tax form.
Is there Form 1099 for cancellation of student loan?
To avoid confusion, the IRS strongly recommends that creditors not provide students (nor the IRS) with a Form 1099-C, Cancellation of Debt – Internal Revenue Service. For more information, see Revenue Procedure 2020-11 (downloads as a PDF).
What happens when you receive a Form 1099-C?
If you received a Form 1099-C, this amount is generally reported as income on your return. Form 1099-C is received when a debt (home, credit card, student loan, etc.) is cancelled. When this happens, it means that you received money when the debt was initially incurred, but you never had to pay it back.
Can a discharged student loan be reported as income?
Under this recent guidance, affected students will not recognize income as a result of the discharge. That means that the taxpayer should not report the amount of the discharged loan on his or her federal income tax return.
