Tax Policy – House Committee Favorably Reports Bill to Stop Taxation of Forgiven Student Loan Debt Due to Death or Disability

Last week, the House Committee on Ways and Means approved H.R. 5204, the Stop Taxing Death and Disability Act. The bipartisan bill would end federal taxation of federal student loans discharged under the “Total and Permanent Disability (TPD)” standard or in the event of the death of a borrower. Under current law, discharged student debt assumed after the death or permanent disability of the student is counted as income by the Internal Revenue Service, and is therefore subject to federal taxation. The Committee on Ways and Means cleared the bill with an amendment by Committee Chair Kevin Brady (R-TX) that would delay the bill’s date of effectiveness until after the end of calendar year 2016. H.R. 5204 has also been referred to the House Committee on Education and the Workforce, which has not yet taken action on the bill. The Arc supports H.R. 5204 as well as a Senate companion bill, S.2800.

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