MangoMan wrote: ↑Thu Aug 25, 2022 7:28 pm
The PPP loans were meant to replace lost business income. They may not be taxable to the business, but the funds were certainly taxable to the recipients (assuming it was used to replace payroll to the owner or employees).
OTOH, the student loan forgiveness is basically a gift so I'm not sure how they would rationalize not taxing it. But then again, the socialists who are in favor of policies like this don't use logic when making decisions, so who knows how it will work.
Fairly early the federal government made it clear that the forgiven loans would not be taxable income to the business. However, until the last minute this was not going to be the case for Masssachusetts taxation purposes. I'm forgetting now but it was either the loan forgiveness was going to be taxed or the expenses used to get it forgiven would not be allowed to be deducted.
It was so last minute for 202 that once the ruling was made I got some tax planning things done with only a few hours to spare now that we knew the way Massachusetts was going to handle the tax forgiveness.
Both federal and Massachusetts made it clear that it was going to be the same tax treatment much earlier for 2021 loans forgiven.
Generally, "gifts" are not considered income. If I give you a gift no tax consequence to you. But if I give you a "gift" which is really some form of compensation then that is taxed.
The student loan forgiveness could go either way. It will go the way the law gets written as to whether or not it will be taxed.