I received the golden email this year, 25 years after beginning to pay off my loans. I'm taking the forgiveness with or without tax issues, and I'm happy to claim insolvency if needed. But how will we know whether or not we'll get a tax bomb? The email said specifically that you *might* be responsible for state taxes and says nothing about federal. My state only charges the tax if the federal does. Do you receive some type of notification that you need to claim the forgiveness on taxes?
I know they are behind on sending the emails out and it's possible I reached the payment count in 2025 but the way I read the rules, it says when the forgiveness is processed, not when the payment count is reached. But even that is clear as mud.
2026 forgiveness and tax bomb
byu/DrAudiology1 inStudentLoans
Posted by DrAudiology1
3 Comments
what is the effective date? also check the backend counter to see how many payments you have. Effective date is when you reached 300 and determines the tax event. Slow processing would deny you relief otherwise.
Whether you get the tax bomb or not depends on your effective date, not the date they actually process your forgiveness. So the date you reached your 300th qualifying payment is what matters. Once your forgiveness is processed, you will get an email with your effective date.
I might be misremembering, but I seem to remember Elizabeth Warren passing a student loan forgiveness tax bomb moratorium during COVID or something to bar federal tax on forgiveness until 2028 or something.