President Biden’s decision to forgive a portion of some student loans and the objections some have raised to his actions received a great deal of media attention over the summer. Receiving significantly less attention were the potential tax implications for those whose loans were forgiven. Many in the tax community were concerned that those who received forgiveness would end up paying much larger tax bills because the IRS has traditionally taxed forgiven debt as income to the taxpayer. Fortunately, Congress had already anticipated the problem and the American Rescue Plan Act of 2021 preemptively excluded most student loan debt from income for the 2021 through 2025 tax years.
