-
If my student loans are forgiven through the Biden-Harris Administration's Student Debt Relief Plan, one-time student loan debt relief, is the amount forgiven taxable for Wisconsin purposes?
Yes.
For federal purposes, the amount of forgiveness is not taxable under sec.
108(f)(5), of the Internal Revenue Code (IRC), as modified by the American Rescue Plan Act (Public Law 117-2). For additional information, visit
studentaid.gov/debt-relief-announcement/one-time-cancellation.
For Wisconsin purposes, the amount of forgiveness is included in gross income. Wisconsin follows the IRC as of December 31, 2020, and has not adopted the changes to sec. 108(f)(5), IRC, made by the American Rescue Plan Act.
-
How do I report the amount of student loan forgiveness on my Wisconsin individual income tax return?
For federal purposes, income from canceled debt is reported on line 8c of federal
Schedule 1 (Form 1040). However, canceled debt from student loan forgiveness that qualifies for an exclusion from gross income is not required to be reported on the federal individual income tax return.
For Wisconsin purposes, if the student loan forgiveness is excluded from gross income for federal purposes, but not for Wisconsin purposes, an addition to federal adjusted gross income must be made on Wisconsin
Schedule I, line 1g. The total adjustments to federal adjusted gross income from line 3 of Schedule I is carried over to either line 2 of
Form 1 or line 31 of
Form 1NPR.
-
If my student loans are forgiven under the public service loan forgiveness program (PSLF), is the amount forgiven taxable for Wisconsin purposes?
No.
The amount of the forgiveness is not taxable for federal purposes under sec.
108(f)(1), IRC. Wisconsin follows this federal provision, and the amount is also not taxable for Wisconsin purposes. For additional information, visit
studentaid.gov/pslf/.
-
If my student loans are forgiven on account of death or total and permanent disability, is the amount forgiven taxable for Wisconsin purposes?
No.
Wisconsin follows sec.
108(f)(5), IRC, as of December 31, 2020 which is prior to the changes made by the American Rescue Plan Act. On December 31, 2020, this section of the IRC allows an exclusion from gross income for the forgiveness of a student loan if it was on account of death or total and permanent disability of the student. For additional information, visit
studentaid.gov/manage-loans/forgiveness-cancellation/death and
studentaid.gov/manage-loans/forgiveness-cancellation/disability-discharge.
Note: Student loans discharged on account of death or total and permanent disability may not be taxable for federal purposes under sec. 108(f)(5), IRC, as modified by the American Rescue Plan Act (Public Law 117-2).
-
If my student loans are forgiven under the teacher loan forgiveness program, is the amount forgiven taxable for Wisconsin purposes?
No.
The amount of the forgiveness is not taxable for federal purposes under sec.
108(f)(1), IRC. Wisconsin follows this federal provision, and the amount is also not taxable for Wisconsin purposes. For additional information, visit
studentaid.gov/manage-loans/forgiveness-cancellation/teacher.
-
If my student loans are forgiven under the National Health Service Corps Loan Repayment program, is the amount forgiven taxable for Wisconsin purposes?
No.
The amount of the forgiveness is not taxable for federal purposes under sec.
108(f)(4), IRC. Wisconsin follows this federal provision, and the amount is also not taxable for Wisconsin purposes. For additional information, visit
nhsc.hrsa.gov/loan-repayment/nhsc-loan-repayment-program.
-
If I made student loan payments under an income-driven repayment plan, and after a certain number of years the remaining balance of my student loans was forgiven, is the amount forgiven taxable for Wisconsin purposes?
Yes.
Federal and Wisconsin law provide that any cancellation of debt is includable in gross income of the debtor (sec.
61(a)(11), IRC), unless the forgiveness qualifies for a specific exclusion under federal or Wisconsin law.
Student loans may be forgiven under sec. 108(f), IRC, as explained in the questions above, or excluded from gross income under certain provisions in sec.
108(a), IRC, (for example, due to insolvency).
Note: If the forgiveness of student loan debt qualifies for one of the exceptions listed in Part I on federal
Form 982,
Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), include the form with your Wisconsin return.
For additional information, visit
studentaid.gov/manage-loans/repayment/plans/income-driven#repayment-period.
-
If my student loans are forgiven, and I did not receive a federal Form 1099-C, do I have to report the amount forgiven on my Wisconsin individual income tax return?
Yes.
Even if you did not receive
Form 1099-C,
Cancellation of Debt, you must report such income on your individual income tax return, unless it qualifies for an exclusion from gross income. See
question 2 for information on how to report income from student loan forgiveness on your Wisconsin individual income tax return.
Form 1099-C must be issued if the amount of debt cancelled is $600 or more. However, the Internal Revenue Service (IRS) issued
Notice 2022-1, which states that lenders and servicers of student loans should not file Form 1099-C with the IRS or issue statements to the borrowers if the student loans are forgiven and excluded from income under sec.
108(f)(5), IRC.
-
If I co-signed on a student loan that was forgiven, and the loan is not eligible for exclusion from gross income for Wisconsin purposes, who includes the loan forgiveness in their Wisconsin income?
For federal and Wisconsin purposes, the loan forgiveness is included in the gross income of the primary debtors. A person that promises to pay a loan in the event that the primary borrower defaults on the loan (i.e., a guarantor) is not considered a debtor, according to Treasury Regulation
1.6050P-1(d)(7), and is generally not required to include the loan forgiveness in their income.