This post was originally published on The Washington Informer

By Stacy M. Brown

As many as 13 states will consider President Joe Biden’s student loan forgiveness a taxable event, levying as much as $1,100 in taxes to some borrowers who receive a $10,000 break, according to an analysis by the Tax Foundation.

When announcing plans to forgive as much as $20,000 in student loans, Biden said provisions in the American Rescue Plan would render the forgiven debt non-taxable. However, the law doesn’t exempt loan forgiveness at the state level.

“As a general rule, a discharge of indebtedness counts as income and is taxable,” Jared Walczak wrote for the Tax Foundation. “Under the American Rescue Plan Act (ARPA), however, the forgiveness of student loan debt between 2021 and 2025 does not count toward federal taxable income. States which follow the federal treatment here will likewise exclude debt forgiveness from their own state income tax bases.

“But, for a variety of reasons, not every state does that,” Walczak said. “There are at least six relevant interactions with the Internal Revenue Code (IRC) for purposes of the treatment of student loan debt cancellation.”

Read More

Leave a comment