Resolution Urges Congress to Prevent IRS from Taxing Loan Forgiveness
(TRENTON) – Legislation Assembly Democrats Cleopatra Tucker sponsored to help ease the financial burden incurred by the family of a deceased student veteran was advanced by an Assembly committee on Monday.
The resolution (AR-97) would urge Washington officials to enact the “Andrew P. Carpenter Tax Act,” federal legislation that would prevent the Internal Revenue Service from collecting taxes on any amount of a student loan forgiven for a deceased veteran.
“Taxing loan forgiveness can be burdensome to family members, especially during their period of grief over the loss of a loved one,” said Tucker (D-Essex). “This legislation is about making sure parents and any other parties who agreed to cosign on a loan for a student veteran do not experience additional suffering after the student’s death.”
Under the federal “Higher Education Act,” a service member who dies as a result of an injury or illness sustained while on active duty must have federal education loans forgiven. The amount of the forgiven loan is then considered taxable gross income for a cosigner by the IRS, however, and family members who agreed to cosign on the loan are held responsible for those taxes. The resolution would urge the president and Congress to prohibit this taxation.
The measure was advanced by the Assembly Military and Veterans’ Affairs Committee, of which Tucker is chair and DeAngelo is vice-chair.