IBR and taxes after repayment

[Trent Steele]

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Does anyone know how to explain what happens tax wise after an IBR payment plan is completed after 25 years of payments? I am currently not eligible for the 10 year public service plan, so I was reading about the govt hitting you with extra income tax after you have completed the 25 yr plan (which is waived upon the completion of public service loan forgiveness program after 10 years).

Any insight on this issue? Search function had low yield for info....

thx

 

[Monsterdaddy]

Does anyone know how to explain what happens tax wise after an IBR payment plan is completed after 25 years of payments? I am currently not eligible for the 10 year public service plan, so I was reading about the govt hitting you with extra income tax after you have completed the 25 yr plan (which is waived upon the completion of public service loan forgiveness program after 10 years).

Any insight on this issue? Search function had low yield for info....

thx

Current law states the amounts forgiven will be fully taxable as income in the year forgiven.

Before you go ape s**t, if you ran a discounted cash flow valuation of paying IBR for 25 years plus a huge tax bill for amounts forgiven vs. repaying the loan fully, you still come out WAY ahead.

And you can hope that the law may change too.

 

[dynx]

Does anyone know how to explain what happens tax wise after an IBR payment plan is completed after 25 years of payments? I am currently not eligible for the 10 year public service plan, so I was reading about the govt hitting you with extra income tax after you have completed the 25 yr plan (which is waived upon the completion of public service loan forgiveness program after 10 years).

Any insight on this issue? Search function had low yield for info....

thx

for example. If you have 150k of outstanding loans forgiven you will pay your normal income tax for that year PLUSS you'll owe the IRS $52,500 cash...right away. (assuming a 35% tax rate...could be way more by that time)

 

[TMP-SMX]

The PSLF after 10 is not taxed. The 25 year cancellation is taxed as income.

 

[Trent Steele]

for example. If you have 150k of outstanding loans forgiven you will pay your normal income tax for that year PLUSS you'll owe the IRS $52,500 cash...right away. (assuming a 35% tax rate...could be way more by that time)

yikes... program sounds like a scam unless your get pslf...

thanks

 

[dynx]

yikes... program sounds like a scam unless your get pslf...

thanks

not really a scam. You still get some forgiven. But if you haven't paid off your loans after 25 years on IBR as a MD or pharmacist you need to seriously question your business skills.

 

[Trent Steele]

not really a scam. You still get some forgiven. But if you haven't paid off your loans after 25 years on IBR as a MD or pharmacist you need to seriously question your business skills.

Paying them off within 25 was never the issue;There are really no savings unless getting plsf. Too bad, its a good idea in theory. The 25 yr plan on rph salary still has you paying out 1.5x as much as a 10yr plan would

 

[Phlame217]

As a doctor or anything high paying, you'd never make it to 25 years on IBR

The way IBR works is when your salary to income ratio is a certain percentage or less, you can do IBR. AS SOON AS YOU exceed that ratio, you're automatically enrolled in the standard 10 year repayment plan.

The way that works out is during residency you can IBR, but as soon as you're an attending you have to skip to the 10 year payment plan.

For those doing the 10 year loan forgiveness, even though you switch from IBR to 10 yr standard, the payments still count towards 120 payments