Wounded war veteran Will Milzarski’s student loan debt was forgiven, but the IRS wants him to pay $62,000 in income taxes on the loan cancellation. The retired 1st Lt. is a lawyer specializing in disability rights and took a leave from his state job to return to the Army to attend Officer Candidate School.
His two tours of duty in Afghanistan left him with a traumatic brain injury, post traumatic stress disorder and hearing loss. The Department of Veterans Affairs considers him totally and permanently disabled, which lead to a cancellation of $223,000 in student loan debt.
But what he didn’t expect was the IRS notice that followed. Milzarski is facing $8,000 in Michigan taxes, penalties and interest in addition to federal taxes- that’s $70,000 in total. Milzarski’s high student debt is largely attributed to his law degree, which he earned in 2002 from Cooley Law School.
He was able to subtract his other debts to bring down the amount of income attributed to the loan forgiveness to $161,000. But that pushed him into the top tax brackets.
While there are some exceptions, canceled debt is often considered income. Milzarski said he is facing garnishment of his disability pay and a lien against his home. Milzarski led soldiers on 244 combat missions and 43 engagements with the enemy. Among his 18 awards are Purple Heart and Meritorious Service medals.
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