STUDENT LOAN DEBT FORGIVENESS

NSTP2015-51, 2015-57, 2017-24, Federal Student Aid (FSA), U.S. Department of Education

The IRS has provided guidance for taxpayers who took out Federal student loans to finance attendance at schools owned by American Career Institutes, Inc. (ACI), and whose loans were discharged under the Department of Education’s Defense to Repayment or Closed School discharge processes. They will not have to recognize gross income as a result of the discharge. IRS further stated that these taxpayers won’t be required to increase their taxes or income to account for education credits under Code Sec. 25A, interest deductions under Code Sec. 221, or higher education expense deductions under Code Sec. 222 claimed in respect to payments made with proceeds of these discharged loans. In addition, prior debt relief guidance is modified to provide that IRS will not assert that creditors under the Revenue Procedure must file information returns and furnish payee statements as a result of the discharge relief provided. Revenue Procedure 2017-24 provides relief from discharge of indebtedness income for taxpayers whose Federal student loans, taken out to attend a school owned by the American Career Institutes, Inc., are discharged by the Department of Education under the “Closed School” or “Defense to Repayment” discharge process. The revenue procedure also provides that the IRS will … Read More