LANSING, Mich. (WLNS) – Lansing State Representative Sarah Anthony has introduced a bill that would make sure students who get their federal loans forgiven don’t get an unwelcome surprise on tax day.
For the most part, forgiven loans are considered income for tax purposes. A lender who forgives or cancels a debt will send you a 1099-C form for you to declare the income on your taxes.
There is a push in Washington for the Biden administration to forgive federal student loans en masse. If that happens, students may be asked to pay income tax on tens of thousands of dollars of forgiven debt.
A new bill introduced by Rep. Anthony and backed by more than a dozen other Democratic state lawmakers would make any student debt forgiven or canceled by the Department of Education immune to state income tax.
Click here to read the bill. It has been referred to the State House Committee on Tax Policy.