5 States Where You Have to Pay Taxes on Federal Student Loan Forgiveness | Global News Avenue

If you are one of the federal student loan borrowers who have been forgiven in 2024, you may struggle to pay state income tax if you live in certain states.

In 2024, then-President Joe Biden Forgive Billions of Dollars in Student Loans For borrowers across the country. Usually, forgiveness of any debt is considered taxable income. But, in 2021, former President Joe Biden’s administration enforces The United States Rescue Plan Act (ARPA)), excluding all federal student loan forgiveness from federal income tax before 2026.

When it was established, some state tax laws did not automatically implement ARPA. These states must decide whether to tax forgiveness as state-level income. Five states – Arkansas, Indiana, Mississippi, North Carolina and Wisconsin – are taxed, but each state has a different policy.

This is the rule of these five states.

Arkansas

Under Arkansas tax policy, student loan forgiveness is considered taxable income.

“This does include most student loan forgiveness. The exception is Public Service Loan Forgiveness Scott Hardin, spokesman for the Arkansas Department of Treasury and Administration, wrote in an email.

Indiana

In Indiana, all federal student loan forgiveness is taxable in addition to loans that are forgiven in the case of PSLF, teacher loan forgiveness, the National Health Service, and comprehensive and permanent disability, bankruptcy, or student death.

Mississippi

Mississippi Taxation Department tells Mississippi Tax Loan Forgiveness Investopedia In the email. However, there is one exception to debt cancelled under coronavirus aid, relief and economic security (care).

North Carolina

In North Carolina, you need to add the amount of student loan forgiveness back to your taxable or Adjusted Total Income (AGI). This tax policy applies to all student loan forgiveness unless they cancel the loan due to death or complete disability.

However, if your student debt is forgiven for bankruptcy, the rules are slightly different and differ in the measures.

Wisconsin

All student loan forgiveness is taxed in the state unless taxed through the PSLF, student death, comprehensive and permanent disability, teacher loan forgiveness program and the National Department of Health Services loan repayment program.