|
Generally, if you are responsible
for making loan payments and
the loan is canceled (forgiven),
you must include the amount
that was forgiven in your gross
income for tax purposes. However,
if your student loan is canceled,
you may not have to include
any amount in income.
To qualify for tax-free treatment
of canceled student loans, your
loan must contain a provision
that all or part of the debt
will be canceled if you work:
- for a certain period
of time
- in certain professions, and
- for any of a broad class
of employers
The loan must have been made
by a qualified lender – the government, a tax-exempt
public benefit corporation such as a municipal hospital, or an
educational institution – to
assist the borrower in attending
an educational institution.
If you refinanced a student
loan with another loan from
an educational institution or
tax-exempt organization, that
loan can also be considered
as made by a qualified lender.
Tax credits and deductions are different: a tax credit directly reduces the amount of income tax you may have to pay, while a deduction reduces the amount of income subject to tax.
The information contained in this section is from IRS Publication 970: Tax Credits for Education. PNC and Villanova University do not
provide tax advice and makes no representation or warranty as to the accuracy of the information. Please consult
your tax advisor for tax advice
matters contained in this section.
For more information, visit www.irs.gov or call 1-800-829-1040.
|
