Taxing forgivent amount after IBR

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Lisochka

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How will the IRS tax the forgiven amount of student loans on IBR/Pay/etc repayment plans?
For example, lets say you owe 250K, and pad off 100 k during 20 years...
So, 150K is being forgiven...What your taxes will be? Is it going to be one third of 150k? Since usually pharmacists are in 30% tax bracket?

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How will the IRS tax the forgiven amount of student loans on IBR/Pay/etc repayment plans?
For example, lets say you owe 250K, and pad off 100 k during 20 years...
So, 150K is being forgiven...What your taxes will be? Is it going to be one third of 150k? Since usually pharmacists are in 30% tax bracket?

It will be your gross income for the year + loan forgiven according to tax bracket.

Example in California:
Making $130k gross + 150k loan forgiven = 280k total gross income
  • 33% tax bracket the fed - $72,871.25
  • 10.3% to California - $23,351.68
Total tax you have to pay in the year your loan forgiven : $96,222. If you don't count gross income, your additional tax burden from 150k forgiven - just like you said, is about $50k extra you have to fork out during the year your loan is forgiven.
 
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Can you work out a payment plan with the IRS?
 
Why are so many people concerned with loan forgiveness and income based repayment? Transfer them to SoFi and pay them off aggressively in 3-5 years. You will never come out ahead paying for 20 years and having them forgiven... any 3rd grader could do the math.
 
Why are so many people concerned with loan forgiveness and income based repayment? Transfer them to SoFi and pay them off aggressively in 3-5 years. You will never come out ahead paying for 20 years and having them forgiven... any 3rd grader could do the math.
Or go to the local community college and take a 3 credit yoga class and a 3 credit photography class and magically your federal loans are deferred. Keep making payments while Uncle Sam pays the interest. Transfer to SoFi after you've run out of fluff classes that interest you.
 
Why are so many people concerned with loan forgiveness and income based repayment? Transfer them to SoFi and pay them off aggressively in 3-5 years. You will never come out ahead paying for 20 years and having them forgiven... any 3rd grader could do the math.

When you look at it in terms of NPV , there are a multitude of situations where paye saves you a lot .. in my case it's almost 200k .. however there is that thorny 900k forgiveness down the road.

If you have ways of minimizing or planning for the tax , you can come out ahead .
 
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When you look at it in terms of NPV , there are a multitude of situations where paye saves you a lot .. in my case it's almost 200k .. however there is that thorny 900k forgiveness down the road.

If you have ways of minimizing or planning for the tax , you can come out ahead .

You should post your scheme...I mean plan on bogleheads.org and see if your plan is feasible. A lot of their members have years of experience and can offer a lot of good inputs. Post the link here. I think we all would like to read it.
 
Or go to the local community college and take a 3 credit yoga class and a 3 credit photography class and magically your federal loans are deferred. Keep making payments while Uncle Sam pays the interest. Transfer to SoFi after you've run out of fluff classes that interest you.

I think unsubsidized loans will continue gaining interest in deferment plus you would have to pay for the classes, though I'm guessing in some unique situation this might be a good idea (if you can't find a job?).
 
When you look at it in terms of NPV , there are a multitude of situations where paye saves you a lot .. in my case it's almost 200k .. however there is that thorny 900k forgiveness down the road.

If you have ways of minimizing or planning for the tax , you can come out ahead .

It saves you 200k? How are you even in debt much beyond 200k to begin with unless you had to repeat years?
 
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