September 2022- Do you have a Federal Student Loan or family members with student loans? The new Student Debt Relief Plan announced late last month will cancel $10,000 in federal student loan debt for individual borrowers whose income was below $125,000 ($250,000 for married couples) in 2020 or 2021, plus another $10,000 for Pell Grant recipients.
Think you may NOT be eligible? Here are some considerations:
--> First, to the extent an individual is a business owner and still has the ability to make deductible contributions to a retirement plan for 2021 (e.g., a self-employed person contributing to their own SEP IRA), if those contributions, and the corresponding deductions, reduce AGI enough to get under the applicable threshold, such contributions should be carefully considered.
--> In addition, if the thresholds for single filers are also applied to married individuals who file separate returns, married couples with student debt should evaluate whether filing separate returns for 2021 makes sense, even if they normally file joint returns. If the debt forgiveness available to one spouse exceeds the additional tax burden (plus any other applicable costs, such as tax prep fees) created by filing separately, it could be a net win.
Please read on to learn more and call us so we can help!