Student Loan Forgiveness

[Eric]

Please forgive my non-tax-person tax question.

My wife had $5000 knocked off her student loans in 2015, but we never received any tax information related to it.  I had assumed that it was taxable income, but even logging into the Navient site didn't produce any documents other than the usual 1098-E.

So I started looking around, and have found this chunk of text often copied and re-posted on different sites:

Quote

Section 61(a)(12) of the Internal Revenue Code of 1986 (IRC) specifies that gross income includes income from the discharge of indebtedness of $600 or more in any calendar year. However, IRC Section 108(f) specifies conditions under which student loan forgiveness is excluded from income. Specifically, IRC section 108(f)(1) states that

In the case of an individual, gross income does not include any amount which (but for this subsection) would be includible in gross income by reason of the discharge (in whole or in part) of any student loan if such discharge was pursuant to a provision of such loan under which all or part of the indebtedness of the individual would be discharged if the individual worked for a certain period of time in certain professions for any of a broad class of employers.

That seems awfully vague to me, but alright. 

It was a teacher loan forgiveness program, and she is a teacher.  She has been a teacher since she graduated more than 10 years ago.  One of the stipulations for the program was that she had to have been teaching for 5 years or more. Should I do anything with this $5000 on our tax return?

[Bart]

Do not do anything with the $5000.  It is not taxable since she held up her end of the bargain by teaching for 5 years.

[Lee B]

Here is a link from the U S Dept of Education which explains that there are multiple but limited

programs which specifically allow forgiveness under specific circumstances:

 

https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation#public-service-loan

I think that the takeaway is that there isn't any broadbased forgiveness program.

[Eric]

On 3/5/2016 at 2:59 PM, Bart said:

Do not do anything with the $5000.  It is not taxable since she held up her end of the bargain by teaching for 5 years.

 

On 3/5/2016 at 3:21 PM, cbslee said:

Here is a link from the U S Dept of Education which explains that there are multiple but limited

programs which specifically allow forgiveness under specific circumstances:

 

https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation#public-service-loan

I think that the takeaway is that there isn't any broadbased forgiveness program.

There was a link from that page:
https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/teacher

That's where the $5000 came from, and she met all of the requirements (had to, in order to get the money to begin with).  So based on that, plus Bart's suggestion that it's not taxable, and the fact that there is no tax information related to it on the lender's site... I'm going with that, and it'll be one of the few times I am pleasantly surprised while I do my return.

Thank you both!