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What is the status of the Biden-Harris Administration's Student Debt Relief Plan (SAVE plan)? If part or all of my student loans are forgiven under the plan, is the amount forgiven taxable for Wisconsin purposes?
The Student Debt Relief Plan is currently tied up in litigation in the federal courts. For additional information, visit studentaid.gov/manage-loans/forgiveness-cancellation/debt-relief-info.
The SAVE plan introduced by the Biden-Harris Administration replaces the existing REPAYE plan. The SAVE plan is an income-driven repayment plan that calculates your monthly payments based on your income and family size. In some cases, loans are forgiven or cancelled after a minimum number of years or payments. See studentaid.gov/announcements-events/save-plan for more information.
The tax treatment of student loan forgiveness from income-driven repayment plans is described in question 7 below.
For more information about Wisconsin's treatment of specific types of student loan forgiveness, refer to the answers for questions 3-7 below.
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How do I report the amount of student loan forgiveness on my Wisconsin individual income tax return?
For federal purposes, income from canceled debt is reported on line 8c of federal
Schedule 1 (Form 1040). However, canceled debt from student loan forgiveness that qualifies for an exclusion from gross income is not required to be reported on the federal individual income tax return.
For Wisconsin purposes, if the student loan forgiveness is excluded from gross income for federal purposes but not for Wisconsin, an addition to federal adjusted gross income must be made on Wisconsin Schedule I, line 1g. The total adjustments to federal adjusted gross income from line 3 of Schedule I is carried over to either line 2 of Form 1 or line 31 of Form 1NPR.
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If my student loans are forgiven under the public service loan forgiveness program (PSLF), is the amount forgiven taxable for Wisconsin purposes?
No.
The amount of the forgiveness is not taxable for federal purposes under sec. 108(f)(1), IRC. Wisconsin follows this federal provision, and the amount is also not taxable for Wisconsin purposes. For additional information, visit studentaid.gov/pslf/.
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If my student loans are forgiven on account of death or total and permanent disability, is the amount forgiven taxable for Wisconsin purposes?
No.
Wisconsin's tax laws follow sec.
108(f)(5) of the federal IRC, as it existed prior to the changes made by the American Rescue Plan Act. That version of sec. 108(f)(5) allows an exclusion from gross income for the forgiveness of a student loan if it was on account of death or total and permanent disability of the student. For additional information, visit studentaid.gov/manage-loans/forgiveness-cancellation/death and studentaid.gov/manage-loans/forgiveness-cancellation/disability-discharge.
Note: Student loans discharged on account of death or total and permanent disability may not be taxable for federal purposes under sec. 108(f)(5), IRC, as modified by the American Rescue Plan Act (Public Law 117-2).
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If my student loans are forgiven under the teacher loan forgiveness program, is the amount forgiven taxable for Wisconsin purposes?
No.
The amount of the forgiveness is not taxable for federal purposes under sec. 108(f)(1), IRC. Wisconsin follows this federal provision, and the amount is also not taxable for Wisconsin purposes. For additional information, visit studentaid.gov/manage-loans/forgiveness-cancellation/teacher.
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If my student loans are forgiven under the National Health Service Corps Loan Repayment program, is the amount forgiven taxable for Wisconsin purposes?
No.
The amount of the forgiveness is not taxable for federal purposes under sec. 108(f)(4), IRC. Wisconsin follows this federal provision, and the amount is also not taxable for Wisconsin purposes. For additional information, visit nhsc.hrsa.gov/loan-repayment/nhsc-loan-repayment-program.
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If I made student loan payments under an income-driven repayment plan, and after a certain number of years the remaining balance of my student loans was forgiven, is the amount forgiven taxable for Wisconsin purposes?
In general, Federal and Wisconsin law provide that any cancellation of debt is includable in gross income of the debtor (sec.
61(a)(11), IRC), unless the forgiveness qualifies for a specific exclusion under federal or Wisconsin law.
For federal purposes, the amount of forgiveness from an income-driven repayment plan may not be taxable under sec.
108(f)(5), IRC, as modified by the American Rescue Plan Act (Public Law 117-2). This Act provided an exclusion from federal income for the forgiveness of many types of student loans if the forgiveness occurs prior to January 1, 2026.
For Wisconsin purposes, the amount of forgiveness from an income-driven repayment plan is included in gross income. Wisconsin has not adopted the changes made by the American Rescue Plan Act to sec. 108(f)(5), IRC.
For additional information, visit studentaid.gov/manage-loans/repayment/plans/income-driven#repayment-period.
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If my student loans are forgiven, and I did not receive a federal Form 1099-C, do I have to report the amount forgiven on my Wisconsin individual income tax return?
Yes.
Even if you did not receive
Form 1099-C,
Cancellation of Debt, you must report such income on your individual income tax return, unless it qualifies for an exclusion from gross income. See question 2 for information on how to report income from student loan forgiveness on your Wisconsin individual income tax return.
Form 1099-C must be issued if the amount of debt cancelled is $600 or more. However, the Internal Revenue Service (IRS) issued
Notice 2022-1, which states that lenders and servicers of student loans should not file Form 1099-C with the IRS or issue statements to the borrowers if the student loans are forgiven and excluded from income under sec.
108(f)(5), IRC.
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If I co-signed on a student loan that was forgiven, and the loan is not eligible for exclusion from gross income for Wisconsin purposes, who includes the loan forgiveness in their Wisconsin income?
For federal and Wisconsin purposes, the loan forgiveness is included in the gross income of the primary debtor(s). A person that promises to pay a loan in the event that the primary borrower defaults on the loan (i.e., a guarantor) is not considered a debtor, according to Treasury Regulation
1.6050P-1(d)(7), and is generally not required to include the loan forgiveness in their income.