The New Jersey Society of CPAs reminds New Jersey taxpayers that student loan debt forgiveness will not result in federal or state taxes

The New Jersey Society of CPAs reminds New Jersey taxpayers that student loan debt forgiveness will not result in federal or state taxes

ROSELAND, N.J. –

The New Jersey Society of Certified Public Accountants (NJCPA) reminds New Jersey taxpayers that the new student loan relief plan signed into law by President Biden on August 24 will not result in federal income or tax on the income of the State of New Jersey.

The three-part plan includes the following elements:

  • Provide targeted debt relief to address the financial damage of the pandemic by:
    • Cancellation of up to $20,000 in student loan debt for Pell Grant recipients who earn less than $125,000 per year ($250,000 married couples).
    • Cancel up to $10,000 in debt for Americans earning $125,000 a year ($250,000 for married couples).
    • Extending the pause on federal student loan repayments one last time until December 31, 2022. Borrowers should expect to resume payments in January 2023.
  • Make the student loan system more manageable for current and future borrowers by:
    • Halve monthly payments for undergraduate loans.
    • Fix the broken Public Service Loan Forgiveness (PSLF) program by proposing a rule that borrowers who have worked in a nonprofit organization, the military, or federal, state, tribal, or local government, receive appropriate credit for loan forgiveness.
  • Protect future students and taxpayers by lowering the cost of college education and holding schools accountable when they raise prices.

While some states consider forgiveness of student loan debt to be taxable income, it is not taxable in New Jersey. According to the New Jersey Division of Taxation, debt forgiveness is not a category of income under the Gross Income Tax Act. Accordingly, income from the discharge of any business or personal debt is not taxable for New Jersey gross income tax purposes.

At the federal level, the 2021 US bailout made student loan forgiveness tax-exempt until 2025 — and the law also covers Biden’s forgiveness, according to a White House fact sheet.

“This is a laudable plan to help those just starting out in their careers who may have significantly high debt or those who have been out of college for a few years and are still struggling to repay,” Ralph said. Albert Thomas, CPA (DC), CGMA, CEO and Executive Director of NJCPA. “In recognition of our own members’ debt burden, the NJCPA has established a Student Loan Debt Task Force and launched a Student Loan Debt Lottery,” he added.

The typical New Jersey undergraduate student has about $35,000 in debt, collectively bringing New Jersey’s total student debt burden to $42.5 billion, according to the latest Education data. Data Initiative.

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The New Jersey Society of Certified Public Accountants, with more than 13,000 members, represents the interests of the accountancy profession and advances the financial well-being of New Jerseyans. The NJCPA plays a leadership role in supporting the profession by providing its members with educational resources, access to shared knowledge, and an ongoing effort to create and expand professional opportunities.

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