President Joe Biden recently stunned the nation by declaring that student loan debts of up to $20,000 would be forgiven, despite the fact that such a scheme primarily hurts struggling American families who opted not to send children to college due to escalating costs.
While the media has been busy lavishing praise upon Biden for shattering checks and balances by effectively taking over Congress’s purse strings through the scheme.
However, a lesser emphasized fact includes the reality that it is at the state’s discretion whether or not to levy taxes upon the loan forgiveness that debtors are due to receive.
Specifically, an analysis from the Tax Foundation declared that loan forgiveness may still be subjected to various taxes, depending on state.
Various states, such as Pennsylvania, Virginia, and New York have already declared that loan forgiveness would constitute a form of tax exemption for residents who can qualify for debt forgiveness, per a report from Bloomberg.
However, deeply conservative states have indicated an alternate course of action, as evidenced by Mississippi’s recent decision to tax loan forgiveness as income.
Mississippi is the first state to make the decision to tax student loan forgiveness, though other states are considering passing similar measures.
For instance, the Department of Finance and Administration in Arkansas indicated to Bloomberg that it was currently “reviewing whether debt forgiveness in this scenario, via executive order, is subject to state income tax.”
The Department of Revenue in Wisconsin, on the other hand, indicated that it would address the issue during a biennial budget meeting. Other states will mull taxation in the following months.
Recipients of Pell Grants may receive up to $20,000 in forgiveness, while all other student loans, regardless of whether or not college was completed, may receive up to $10,000 in forgiveness. Recipients of the forgiveness cannot make over $125,000 years as a single earner, or over $250,000 as a joint household.