The announcement this week that $10,000 to $20,000 of student loan debt could be forgiven was welcome news to all who qualify to receive it. But because loan forgiveness and loan cancellation are usually reported as income on your tax returns (and are therefore taxable), you may be asking how this will affect you when it comes time to prepare your 2022 tax returns.
Good news! Because of a provision in 2021’s American Rescue Plan (ARP), federal student loan forgiveness will not be reported as income, although it’s possible you may have to report it. The stimulus payments sent out during the pandemic were not considered income but still had to be included on your tax returns. We’ll know more about this at the beginning of 2023. In the meantime, if you receive any notices or documents regarding your student loan forgiveness, save them with your tax documents in case they’re needed.