Prior Law

Through December 31, 2017

Gross income generally includes the discharge of indebtedness of the taxpayer. Under an exception to this general rule, gross income does not include any amount from the forgiveness (in whole or in part) of certain student loans, if the forgiveness is contingent on the student’s working for a certain period of time in certain professions for any of a broad class of employers.

New Law

Effective for tax years beginning after December 31, 2017

For discharges of indebtedness, certain student loans that are discharged on account of death or total and permanent disability of the student are also excluded from gross income.

Commentary

As student loans increase, this addition will assist taxpayers who become disabled or pass away. Although not clear, this new law does not appear to affect the lender’s ability to continue to collect the amounts from co-signers or guarantors.

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Jeff Dvorachek
I joined Hawkins Ash CPAs in 1998. I am the partner-in-charge of the Manitowoc, WI, office and tax director for the firm. I have thorough experience providing tax services to individuals, commercial businesses, nonprofit entities and estates and trusts. I also provide compilation and review services. I lead the Tax Committee and am a member of the Information Technology Advisory Committee.

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