Why does the IRS not allow student loan payments to be deducted from taxable income, especially when businesses can write off certain expenses, including education-related costs? What are the underlying principles that differentiate personal education financing from business expenses in terms of tax deductions?
If student loans are inescapable, even in bankruptcy, wouldn’t it be more logical to allow them to be deducted from taxable income, rather than relying solely on the federal government to pay them off?
During the COVID-19 pandemic, many businesses received Paycheck Protection (PPP) loans, a significant portion of which were forgiven, effectively providing them with tens of thousands of dollars in ‘free money’ funded by taxpayers. While some businesses genuinely needed this financial support to continue operations and survive, others received funds they did not require. In this context, one could argue that the funds used for these loans could have been redirected to assist in paying off student loans. Yet, there remains substantial resistance to the federal government providing similar assistance for student debt. Why is that?
The primary reason that “the IRS does not allow …” is because the IRS does NOT make the tax laws. CONGRESS DOES. Don’t like something in our federal tax code? Call your senators and congressman. THEY MAKE THE RULES!
The reason student loan payments are taxable is because you’re repaying them from income - the income is taxable not the debt.
In my case, I have paid taxes on my income, and I never had student loan debt. Is it fair to me that someone who went into debt up to their eyeballs for an education gets a tax break that I don’t?
I also think if there’s some form of debt forgiveness (like Sleepy Joe was trying to ram down our throats despite being told no by the SCOTUS) that the forgiven debt should be considered and reported as taxable income.
Now, if they ever push through a change from an income tax to a consumption tax (aka the “FAIR” Tax, although I remain on the fence and don’t advocate for or against it), then there might be a discussion about certain categories being “tax free” - much like my home state of Texas, where groceries are exempt from sales taxes - and that could be a topic for discussion.