One of the issues that the One Big Beautiful Bill Act didn’t address is a tax provision sunsetting at the end of 2025 that forgives up to $10K in debt forgiveness to Student Loan Borrowers. The program known as the Income Driven Repayment Program (IDR)makes the debt forgiveness non-taxable, given certain tax attributes for taxpayers in lower income brackets.
Debt forgiveness is generally taxable because it treats the amount of forgiven debt as a form of income. No longer being required to repay a debt is an economic benefit, and is usually taxable under the IRS Code.
In 2021, Congress enacted a provision excluding student debt cancellation from taxable income so borrowers who received student debt relief after years of repayment wouldn’t face higher tax bills. The provision is set to expire in December, so unless Congress acts, borrowers on IDR plans who have legally earned debt cancellation after 20 or 25 years of repayment will be hit with heftier tax bills next year.
Several Senators sent a letter to Scott Bessent, Director of the Treasury and Acting Head of the IRS, urging him to take actions to extend the program ending this year. We’ll see if anything gets done to stop this tax bomb from hitting borrowers on next year’s returns.
Let me leave you with this…
The IRS recently announced the adjustments for annual retirement plan contribution limits for 2026. Those updates include…
1 – The maximum limit for 401(k) plans, as well as 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan, grew to $24,500 in 2026, up from $23,500 in 2025.
2 – The catch-up contribution limit that generally applies for employees aged 50 and over who participate in most 401(k), 403(b), 457 plans, and the Thrift Savings Plan grew to $8,000, up from $7,500 for 2025.
3 – The upper limit on annual contributions to an IRA grew to $7,500, up from $7,000.
4 – The maximum limit on annual contributions to a Regular IRA also grew to $7,500 from $7,000.
5 – The IRA catch‑up contribution limit for individuals aged 50 and over was amended under the SECURE 2.0 Act of 2022 to include an annual cost‑of‑living adjustment, and is increased to $1,100, up from $1,000 for 2025.
Please make sure to fully fund your retirement plans for this year’s returns. If you have any questions, please don’t hesitate to contact me.
We’re all going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
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