In Mississippi, Minnesota, Wisconsin, Arkansas and North Carolina, forgiven student loans will be subject to state income taxes unless they change their laws to conform with a federal tax exemption for student loans.
President Joe Biden's student loan forgiveness plan could lift crushing debt burdens from millions of borrowers, but the tax man may demand a cut of the relief in some states.
Newman said she can come up with the cash because she has a good job, but she knows of a lot of other borrowers who will still be stuck in difficult financial positions even with their loans forgiven. Although having $10,000 or $20,000 in loan payments eliminated will be a boon over the long term to borrowers who qualify, those in the affected states might be required to declare that as income. Depending on a state's tax rates, the taxpayer's other income and the deductions and exemptions they're able to claim, that could add up to several hundred extra tax dollars that they'll owe.
“It's not a huge burden for me, but it could be for a lot of other people, which is what I'm worried about, especially if it's unexpected, and I think a lot of people don't realize that,” Newman said.
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Some states could tax Biden’s student loan debt reliefPresident Joe Biden’s student loan forgiveness plan could lift crushing debt burdens from millions of borrowers. But in some states, the tax man may demand a cut of that relief.
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Some states could tax Biden's student loan debt reliefPresident Joe Biden’s student loan forgiveness plan could lift crushing debt burdens from millions of borrowers
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Some states could tax Biden’s student loan debt reliefPresident Joe Biden’s student loan forgiveness plan could lift crushing debt burdens from millions of borrowers. But in some states, the tax man may demand a cut of that relief.
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