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    IRC §108 · ARPA §9675 sunset 12/31/2025 · Form 982

    Student Loan Forgiveness Tax Calculator

    Starting January 1, 2026, the ARPA §9675 exclusion is gone. IDR forgiveness (SAVE→RAP, IBR, PAYE, ICR) is federally taxable ordinary income. This tool bracket-stacks the discharge, applies the §108(a)(1)(B) insolvency escape, and preserves statutory tax-free treatment for PSLF, teacher, and death or disability discharges (the last two need your work-valid SSN on the return from 2026).

    Updated Reviewed for TY 2025 & 2026 (post-ARPA)
    Federal only · state rules vary

    PSLF and teacher forgiveness remain federally tax-free under IRC §108(f)(1). Death and TPD discharges are excluded under §108(f)(5); for discharges after 2025, only if your return includes your Social Security number (one valid for work, issued by the return's due date). An ITIN does not qualify.

    Insolvency worksheet · §108(a)(1)(B)

    Immediately BEFORE the discharge. Include the loan being forgiven in liabilities. The escape shields min(forgiven, liabilities − assets).

    TY 2026
    Ordinary income — bracket stacking
    Statutory exclusion (PSLF/teacher/TPD)$0
    §108 insolvency exclusion (Form 982)$70,000
    Taxable forgiveness (ordinary income)$10,000
    Baseline federal tax (income only)$7,912
    Federal tax with forgiveness stacked$10,112
    Added federal tax (bracket-stacked)$2,200

    Honesty box

    • Federal only. Most states conform, but some (e.g. IN, NC, MS, WI) tax discharged debt — check your state DOR.
    • Assumes the discharge lands in the year shown. Big lump-sum discharges may trigger an underpayment penalty — see the estimated-tax calculator.
    • Insolvency is measured immediately BEFORE the discharge. Form 982 must be filed to claim it.

    Related

    Sources & References

    Primary references used for this content

    IRS Topic 431

    Canceled Debt — Is It Taxable or Not?

    Plain-English IRS explainer for discharged debt including student loans.

    View on irs.gov

    Publication 4681

    Canceled Debts, Foreclosures, Repossessions, and Abandonments

    The insolvency worksheet and Form 982 walkthrough.

    View on irs.gov

    IRC §108

    26 U.S.C. §108 — Income from discharge of indebtedness

    The statute: (a)(1)(B) insolvency, (f)(1) PSLF/teacher, (f)(5) ARPA sunset.

    View on law.cornell.edu

    Form 982

    About Form 982 — Reduction of Tax Attributes

    How to claim the insolvency exclusion on your return.

    View on irs.gov

    IRC §127

    26 U.S.C. §127 — Educational assistance programs

    $5,250 employer repayment exclusion, made permanent by OBBB.

    View on law.cornell.edu

    ARPA (H.R. 1319)

    American Rescue Plan Act §9675 — text

    The exclusion enacted for 2021-2025 discharges.

    View on congress.gov

    ✓6 primary sources; links re-checked on a weekly rotation by the source watcher

    Disclaimer: This calculator provides estimates for educational purposes only. Not tax, legal, or financial advice. Results may vary based on your specific circumstances. Consult a qualified CPA or tax professional for personalized guidance.