Michigan Expands Tax Deductions for Disabled Veterans

Legislation recently signed by Gov. Gretchen Whitmer will expand tax deductions available to Michigan’s disabled veterans.

Enacted on December 7, 2021 – the 80th anniversary of the attack on Pearl Harbor – Senate Bill 25 will allow disabled veterans to deduct taxable income attributed to forgiveness or cancellation of a student loan under the U.S. Department of Education’s Total and Permanent Disability Discharge Program. Disabled veterans in the state can now deduct income attributed to student loan debt forgiveness for the 2016 to 2019 tax years and each year going forward starting in 2025.

Specifically, Section (1) (aa) of SB25 provides that:

For the 2016, 2017, 2018, and 2019 tax years and for each tax year that begins on and after January 1, 2025, a taxpayer who is a disabled veteran may deduct, to the extent included in adjusted gross income, income reported on a federal income tax form 1099-C that is attributable to the cancellation or discharge of a student loan by the United States Department of Education pursuant to the total and permanent disability discharge program, 34 CFR 685.213.

As used in this subdivision, “disabled veteran” means an individual who meets either of these criteria:

• Has been determined by the United States Department of Veterans Affairs to be permanently and totally disabled as a result of military service and entitled to veterans’ benefits at the 100 percent rate.
• Has been rated by the United States Department of Veterans Affairs as individually unemployable.

If you are a disabled veteran, we thank you for your service and sacrifice. If you have questions about the new law, please contact Ryan Conboy at Kreis Enderle today.