Is Student Loan Forgiveness for TPD Taxed in Georgia?

Student loan forgiveness is a significant relief for many borrowers, particularly those who qualify under the Total and Permanent Disability (TPD) discharge program. This program is designed to help individuals who can no longer work due to a severe disability by canceling their federal student loans. However, many borrowers are concerned about whether the forgiven debt will be considered taxable income, especially at the state level. In Georgia, as in many other states, the tax treatment of forgiven student loans has evolved over recent years, particularly due to changes in federal law. Understanding whether TPD loan forgiveness is taxed in Georgia requires looking at both federal and state tax policies. Under federal law, thanks to recent legislative changes, TPD discharges are not considered taxable income through 2025. But what about Georgia’s state tax laws? Fortunately for borrowers in the Peach State, Georgia follows federal tax guidelines on this issue, meaning that TPD loan forgiveness is not taxed at the state level either.

Federal Tax Treatment of TPD Loan Forgiveness

At the federal level, student loan forgiveness under the Total and Permanent Disability (TPD) discharge program was once considered taxable income. However, this changed with the passage of the Tax Cuts and Jobs Act (TCJA) of 2017, which exempted forgiven loans from taxation for borrowers who qualify due to a permanent disability. This exemption applies to loans discharged between 2018 and 2025. As a result, if you received a TPD discharge during this period, you do not need to report the forgiven amount as taxable income on your federal tax return[1][3].

The American Rescue Plan Act (ARPA) of 2021 further solidified this exemption by expanding it to include other types of student loan forgiveness through 2025. However, these exemptions are set to expire after December 31, 2025, unless new legislation extends them[1].

State Tax Treatment of TPD Loan Forgiveness in Georgia

While federal law provides clear guidance on TPD loan forgiveness, each state has its own rules regarding whether forgiven debt is considered taxable income. Some states have chosen not to follow federal guidelines and continue to tax forgiven student loans as income. Fortunately for borrowers in Georgia, this is not the case.

Georgia conforms to federal tax treatment when it comes to student loan forgiveness under the TPD program[4]. This means that if your loans are forgiven due to a total and permanent disability between 2018 and 2025, you will not owe state income taxes on the discharged amount. This alignment with federal law provides significant relief for borrowers who might otherwise face unexpected tax bills.

What Happens After 2025?

The current exemption from taxation for TPD loan forgiveness is set to expire at both the federal and state levels after December 31, 2025. If no new legislation is passed before then, borrowers who receive loan forgiveness after this date could face taxes on their discharged debt.

It’s important for borrowers in Georgia to stay informed about potential legislative changes that could impact their tax liability after 2025. Federal lawmakers have introduced proposals like the Student Tax Relief Act, which aims to permanently exclude all canceled student debt from being taxed[1]. If passed, such legislation could provide long-term relief for borrowers across all states.

Conclusion

For now, borrowers in Georgia who receive student loan forgiveness under the Total and Permanent Disability (TPD) discharge program can breathe a sigh of relief: their forgiven debt will not be taxed as income at either the federal or state level through 2025. However, unless new legislation is enacted before then, this exemption may end after December 31, 2025. It’s crucial for borrowers to remain vigilant about potential changes in both federal and state tax laws regarding student loan forgiveness.

In summary: Borrowers receiving TPD loan forgiveness in Georgia are currently exempt from both federal and state taxes on their discharged debt through 2025. However, after that date, unless new laws are passed, they may face taxation on forgiven amounts.