Which type of forgiven debt is exempt from taxation through 2025 according to the American Rescue Plan?

The type of forgiven debt that is exempt from taxation through 2025 as per the American Rescue Plan is forgiven student loan debt. This legislation allows borrowers who have had their student loans forgiven, whether through federal programs, administrative actions, or other forms of cancellation, to do so without facing federal income tax on the forgiven amount. This temporary tax relief aims to ease the financial burden on borrowers during a challenging economic period.

The other types of forgiven debt, such as foreclosure, repossession, or abandonment of property, typically are subject to taxation under federal law, although there may be specific exceptions or different rules that apply in certain circumstances. In contrast, the clear intention of the American Rescue Plan is to provide a safeguard for those dealing with student loan debt, highlighting the priority of addressing educational financial burdens within the context of broader economic recovery efforts.