Question About Tax Treatment of PAYE Forum

[Anonymous User]

This is a very specific question, and not something that's been answered online. However, someone might have specialized knowledge or have heard tax lawyers contemplate it.

As most know, PAYE is an option to repaying student loans that allows you to have the option of paying 10% of your income above the poverty threshold (currently $18,000) for 30 years and then your debt is forgiven.

The general tax issue is that forgiven debt is treated as income so in 30 years if your debt is still 300k because you never cut into the principle then you owe taxes on $300k.

Here's my question, followed by a partly related question:

(1) You do PAYE, but in 20 years move to France, who for argument's sake is a country that does not treat forgiven debt as income. 10 years later, when you're forgiven the $300k loan balance, are you also exempt from taxes on the forgiven debt? I'd think you would be... no?

(2) What if you earn 200k for your first 5 years, then drop to 50k. Would you still have to keep paying based on your original income?

[A. Nony Mouse]

I don't have any information about Q1, but you certify your income at least once a year, or when your income changes significantly. So if your income goes down you certify that with your loan provider and the payment goes down as well. That's what they mean by income-based.

[Johann]

This is a very specific question, and not something that's been answered online. However, someone might have specialized knowledge or have heard tax lawyers contemplate it.

As most know, PAYE is an option to repaying student loans that allows you to have the option of paying 10% of your income above the poverty threshold (currently $18,000) for 30 years and then your debt is forgiven.

The general tax issue is that forgiven debt is treated as income so in 30 years if your debt is still 300k because you never cut into the principle then you owe taxes on $300k.

Here's my question, followed by a partly related question:

(1) You do PAYE, but in 20 years move to France, who for argument's sake is a country that does not treat forgiven debt as income. 10 years later, when you're forgiven the $300k loan balance, are you also exempt from taxes on the forgiven debt? I'd think you would be... no?

(2) What if you earn 200k for your first 5 years, then drop to 50k. Would you still have to keep paying based on your original income?

1: moving to france by itself doesnt eliminate your US tax liability. so, no you are wrong. no exemption.
2: you recertify every year whether you want to or not and you can always call them up if your income changes to get a new payment based on your new income.

[dixiecupdrinking]

Yeah pretty sure the IRS doesn't care that you moved to France.

[Anonymous User]

Yeah, like the above posters said...I'm guessing you would have to move to some place that doesn't have all those tax treaties with the US , like North Korea lol and denounce your US citizenship. Then the gov't wouldn't be able to get you, but there still would be a tax bill.