I have heard that for purposes of the tax bomb, you are considered to obtain forgiveness when you make your last payment. What if someone wants to opt out of IDR forgiveness?
The date-of-last-payment approach made sense to me for the 2025/2026 transition because the tax bomb was just beginning. Looking ahead to 2026/2027, however, I have questions.
I am 8-10 payments away from qualifying for IDR forgiveness. I am hearing that if I make my last payment in December 2026, forgiveness will be on my 2026 tax return. I am having trouble wrapping my mind around this. Would this still be the case if I were going to opt out of IDR forgiveness? If I opted out in early 2027, would this resolve before I filed 2026 taxes? Would I need to file with the tax bomb and the amend?
(I don’t really want to opt out! I just want the bomb to hit in 2027 and honestly, being taxed when a benefit is received is what makes sense to me at this point, now that the tax bomb exists on both parts of the 2026/2027 divide.)
Is anyone in a similar boat? Do we think more guidance will come on this issue?
Tax bomb and opting out of IDR forgiveness
byu/Bay_Fan inStudentLoans
Posted by Bay_Fan
1 Comment
You can opt out if you want. Or, if you want to move it to a different tax year you could request a forbearance for a few months and then resume making payments.