A couple more questions regarding the $10k "forgiveness" for student loans popped into my head overnight.
Will the $10k of "forgiveness" be treated as imputed income and will income tax be owed on it? So if a former student has a marginal income tax rate of 15% in 2022, will they find themselves owing an additional $1500 on April 15, 2023? This might be a good thing to know before the mid-term elections.
Also, suppose two people with student loans are contemplating marriage. Furthermore, suppose their combined income exceeds $125k per year. How will their income be calculated for "loan forgiveness" reasons? After all, if the Democrats forgave $10k in 2022 then it is reasonable to speculate that more will be forgiven in future years. If the household income is used to determine eligibility then the "forgiveness" will function as a marriage tax.
Its all illegal no matter how you slice and dice it. CONgress controls the purse. I forsee court challenges during this election cycle. The divisions in our society are going to be exploited, not bridged.
ReplyDeleteHoly Guacamole. I bet you are right.
ReplyDeleteIt appears the forgiveness will be tax-free. The American Rescue Plan Act made student loan debt forgiven between 2021 - 2025 tax - exempt .
ReplyDeleteCorrect. Normally forgiven debt is treated as imputed income (see Internal Revenue Code Section 108), but there are exceptions, and they made this one of them.
DeleteMore second order effects that most people don't consider...
ReplyDeleteNext question - can the payments be garnished for other federal debts?
Sound bites are easy but Math is HARD... Especially for those who were socially advanced instead of taught the basic concepts
ReplyDeleteI’ve grown to expect that at most (the usual PITA) 25% of the population will ever even consider future ramifications, let alone second or third order effects of … well anything. And asking most to consider effects on others … Oh, puh-lease! (OK, they ‘may’ occasionally notice, but care … not a chance).
ReplyDeleteMost appear to live in a bubble of self-interest and immediate gratification only.
So? Please name a single instance where government legislation actually did what it was allegedly intended to do. Then name a single instance where it ‘didn’t’ cause results entirely the polar opposite of those claims.
My prediction. Student debt will go up (as more suddenly decide it will never need paying back). Government will then amazingly find they need to recoup money from those they ‘forgave’ and there’ll be some new “degree related tithe” imposed (that’ll be expanded to include any work related qualifications – it’s only ‘fair’ after all, if you are earning more, for you to pay for all the lazy … I mean unqualified loafers … damn, I mean poor).
If it splits up a few marriages, and makes marriage even less attractive too … well, that’ll just be a bonus.
Is my cynicism showing?
It won't be taxable - that was already passed in one of the dozens of COVID relief packages.
ReplyDelete