A loan cleared on death or disability is left out of income
What the document says“gross income does not include any amount which (but for this subsection) would be includible in gross income for such taxable year by reason of the discharge (in whole or in part) of any loan described in subparagraph (B)”
The section rewrites section 108(f)(5) of the Internal Revenue Code of 1986 so that an individual's gross income does not include an amount that would otherwise be counted because a loan was discharged in whole or in part, where the discharge was under subsection (a) or (d) of section 437 of the Higher Education Act of 1965 or the parallel benefit under part D of title IV of that Act, under section 464(c)(1)(F) of that Act, or otherwise on account of the student's death or total and permanent disability. A loan is covered if it is a student loan as defined in paragraph (2) or a private education loan as defined in section 140(a) of the Consumer Credit Protection Act.
What the document actually says“gross income does not include any amount which (but for this subsection) would be includible in gross income for such taxable year by reason of the discharge (in whole or in part) of any loan described in subparagraph (B)”
A loan that is wiped out does not count as income. That holds whether it is cleared in full or in part.
The loan must be cleared for one of three reasons. Death is one. Total and lasting disability is another. Private student loans count too.
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