Resolution Urges Congress to Prevent IRS from Taxing Loan Forgiveness
Legislation Assembly Democrats Cleopatra Tucker, Gordon M. Johnson, Jamel Holley and Wayne DeAngelo sponsored to help ease the financial burden incurred by the family of a deceased student veteran was advanced by an Assembly committee on Thursday.
The resolution (AR-135) 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.
“Families of deceased student veterans have sacrificed so much for this country. When their loved ones gave their lives for the United States of America, they, too, gave a part of themselves,” said Johnson (D-Bergen). “Considering that level of sacrifice, it’s only right for the federal government to take action on their behalf.”
“For parents with a son or daughter in the United States Armed Forces, that child’s death is their greatest fear,” said Holley (D-Union). “When that fear is realized and the federal government makes these parents pay taxes on a deceased student’s loan – especially when the loan itself has already been forgiven – it’s just unconscionable.”
“Our nation ought to honor every student veteran who makes the ultimate sacrifice for the sake of the freedom and democracy of the United States of America,” said DeAngelo (D-Mercer/Middlesex). “Part of paying homage to those students who took out loans is alleviating as much of the financial burden on their families as possible. With the simple reform to the tax code outlined in this federal legislation, our country can show its support for military families.”
The measure was advanced by the Assembly Military and Veterans’ Affairs Committee, of which Tucker is chair and DeAngelo is vice-chair.