fORM 1099-C

If you need to enter a Form 1099-C, go to the Income section of TurboTax under Miscellaneous Income.

When you are in the 1099-C section of TurboTax Online, under Wages and Income, and you reach the screen that states "Enter Some Info from Your 1099-C", note that the directions state "If you have more than one 1099-C, add the numbers from each one together and enter the totals below".

If your student loan debt is forgiven, you may be issued Form 1099-C. Some student loan debt forgiveness is taxable and some is not. Please see this TurboTax tips article for details.

Forgiving a federal student loan balance, and the possible resulting tax consequences, primarily impacts borrowers who use income-driven repayment plans. These payment plans last for a set amount of time, typically 20 or 25 years, and require you to pay between 10% and 20% of your discretionary income until you repay the loan.

Any remaining balance after the payment plan ends gets forgiven. This forgiven amount can be considered taxable income in the year it occurs, depending on your repayment plan and loan program.

If you receive loan forgiveness under federal student loan programs, it will likely count as a tax-exempt gain (or reduction in liability). You typically won't face a tax consequence from loan forgiveness in the following situations:

• You successfully participate in a qualifying federal loan program. If you follow the rules of programs like Public Service Loan Forgiveness, Teacher Loan Forgiveness, and similar federal loan programs, any loan forgiveness you receive should not be taxable.
• You pass away or become permanently disabled. If you die or become permanently disabled, neither you nor your estate will be hit with a tax bill for forgiven debt under federal student loan programs.
• Your loan gets discharged on account of fraud or school closure during enrollment. The government grants tax-free loan forgiveness in instances where you took on student debt and were defrauded by your school or it closed while you were enrolled.
• The government cancels your debt by an act of law or executive order.

You might also qualify for state-level loan forgiveness programs that offer tax-free loan forgiveness. If not, you might find that your loan forgiveness is taxable for state income tax even if not taxable for federal taxes. Research the possible loan forgiveness programs offered by your state and whether you may qualify for tax-exempt loan forgiveness.

See this tax tips article for more information about Form 1099-C.