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My education loan for my Son was waived! Do i pay taxes on…

Customer Question
My education loan for...

My education loan for my Son was waived! Do i pay taxes on the loan?

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

I'm 100% military/VA disabled, also Social security.

Accountant's Assistant: Is there anything else important you think the Accountant should know?

Not sure?

Submitted: 4 months ago.Category: Tax
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3/8/2018
Tax Professional: Lev, Tax Advisor replied 4 months ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 33,141
Experience: Taxes, Immigration, Labor Relations
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Are you a co-signer on that loan OR you are a borrower?

Did you receive a form 1099C in your or in your son's name?

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Customer reply replied 4 months ago
Borrower
Tax Professional: Lev, Tax Advisor replied 4 months ago

If you borrow money and are legally obligated to repay a fixed or determinable amount at a future date, you have a debt.

If your debt is forgiven or discharged for less than the full amount you owe, the debt is considered canceled in the amount that you don't have to pay.

After a debt is canceled, the creditor may send you a Form 1099-C.pdf, Cancellation of Debt, showing the amount of cancellation of debt and the date of cancellation, among other things.

In general, you must report any taxable amount of a canceled debt as ordinary income from the cancellation of debt on Form 1040.pdf, U.S. Individual Income Tax Return, as "other income" on line 21.

The canceled debt isn't taxable, however, if the law specifically allows you to exclude it from gross income.

.

Amounts that meet the requirements for any of the following exceptions aren't cancellation of debt income.

EXCEPTIONS to Cancellation of Debt Income:

  1. Amounts canceled as gifts, bequests, devises, or inheritances
  2. Certain qualified student loans canceled under the loan provisions that the loans would be canceled if you work for a certain period of time in certain professions for a broad class of employers
  3. Certain other education loan repayment or loan forgiveness programs to help provide health services in certain areas.
  4. Amounts of canceled debt that would be deductible if you, as a cash basis taxpayer, paid it
  5. A qualified purchase price reduction given by the seller of property to the buyer
  6. Any Pay-for-Performance Success Payments that reduce the principal balance of your home mortgage under the Home Affordable Modification Program

Amounts that meet the requirements for any of the following exclusions aren't included in income, even though they're cancellation of debt income.

EXCLUSIONS from Gross Income:

  1. Debt canceled in a Title 11 bankruptcy case
  2. Debt canceled during insolvency
  3. Cancellation of qualified farm indebtedness
  4. Cancellation of qualified real property business indebtedness
  5. Cancellation of qualified principal residence indebtedness that is discharged subject to an arrangement that is entered into and evidenced in writing before January 1, 2018.
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Tax Professional: Lev, Tax Advisor replied 4 months ago

I specifically want you to verify

#3 - Debt canceled during insolvency - if you was insolvent - you may specifically claim that exemption on form 982 attached to your tax return - and will not be taxed on that amount.

Let me know if you need any help with determination and/or reporting.

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