--- title: These 5 States May Tax Your Student Loan Forgiveness description: Student loan borrowers won't owe federal income taxes on discharged debt, but if you live in one of these states, your tax bill could go up. authors: - name: Adam Hardy role: Lead Data Reporter url: https://money.com/author/adam-hardy/ bio: Adam Hardy is a lead data journalist at Money, where he frequently reports on financial barriers that affect low-income Americans. Adam’s work has also appeared in Business Insider, Forbes, Nasdaq, The Penny Hoarder, Yahoo! Finance and more than a dozen local and regional newspapers. education: University of South Florida, BA, Magazine Journalism at_money_since: 2021 articles: 501 covers: - Personal Finance - Banking - Business - Career Advice - Credit - Credit Cards - Debt - Economy and Politics - Education - Health and Wellness - Housing - Identity Theft - Insurance - Investing - Lifestyle - Loans - Mortgages - Pets - Professional Services - Retirement - Shopping - Taxes - Technology also_seen_in: - The Penny Hoarder - Forbes Advisor - Creative Loafing - The New York Times - The Washington Post - Bloomberg - Harvard Law School - The Federal Register - National Consumer Law Center - CBS News - Becker's Hospital Review - Business Insider - Mother Jones - The Week - Fortune - The Philadelphia Inquirer - National Association of Student Financial Aid Administrators (NAFSAA) - Education Advisory Board (EAB) - The Institute for College Access & Success (TICAS) - This Morning with Gordon Deal - Empower - Reddit social: - https://www.x.com/hardyjournalism - https://www.linkedin.com/in/hardyjournalism/ editors: - name: Kaitlin Mulhere role: Editor url: https://money.com/author/kaitlin-mulhere/ bio: Kaitlin Mulhere has been covering the intersection of college and personal finance since 2015. She enjoys breaking down the complexities of college costs and financial aid, and she also runs Money’s Best Colleges. education: University of Florida at_money_since: 2015 articles: 217 covers: - Personal Finance - Banking - Business - Career Advice - Credit - Credit Cards - Debt - Economy and Politics - Education - Health and Wellness - Housing - Identity Theft - Insurance - Investing - Lifestyle - Loans - Mortgages - Retirement - Shopping - Taxes social: - https://twitter.com/KMulhere - https://www.linkedin.com/in/kaitlin-mulhere-64503048/ published: '2022-08-31T17:53:13.000Z' modified: '2022-09-01T15:40:51.000Z' section: Personal Finance tags: - News - student debt - Student Loans word_count: 614 canonical: https://money.com/student-loan-forgiveness-state-taxes/ type: NewsArticle source: structured-blocks --- > **Disclosure:** We research all brands listed and may earn a fee from our partners. Research and financial considerations may influence how brands are displayed. Not all brands are included. [Learn more](https://money.com/page/disclaimer/). ![Photo illustration of graduates](https://img.money.com/2022/08/News-States-Tax-student-loan-forgiveness.jpg?crop=0px%2C129px%2C2880px%2C1620px&quality=85) Student loan borrowers in a handful of states could wind up having to pay hundreds of dollars in taxes on student debt forgiven under President Joe Biden's new plan. Student loan forgiveness is [exempt from federal income taxes](https://money.com/student-loan-forgiveness-tax-exempt-stimulus-plan/), thanks to a clause in last year's American Rescue Plan. Most states either follow that new federal rule or don't have an income tax. But several states' tax codes do count canceled student loans as income, according to an [updated analysis](https://taxfoundation.org/student-loan-debt-cancelation-tax-treatment/) from the Tax Foundation. For some borrowers, that could hike their state tax bills by up to $985 for $10,000 of forgiven loans — and ostensibly more for those borrowers who received Pell Grants and are [eligible for $20,000 worth of forgiveness](https://money.com/student-loan-forgiveness-who-qualifies/). Five states are currently on track to tax student debt forgiveness, says Jared Walczak, vice president of state projects for the Tax Foundation. Those states are Arkansas, Minnesota, Mississippi, North Carolina and Wisconsin. ## The right Tax Relief firm makes all the difference, especially if you owe over $10,000 in taxes. ### Get the tailored experience that you expect from the tax litigation professionals in your area. Click on your state to get started! [Get Started](https://money.com/pr/kc0833a52be9?ap_referrer=%2Fstudent-loan-forgiveness-state-taxes%2F) Mississippi’s Department of Revenue [confirmed to Bloomberg](https://www.bloomberg.com/news/articles/2022-08-30/mississippi-in-a-departure-to-tax-forgiven-student-debt#xj4y7vzkg) Tuesday that it will tax forgiven student loans. Similarly, Minnesota’s Department of Revenue [updated its website Friday](https://www.revenue.state.mn.us/cancellation-education-loans) to say that it will also be taxing discharged student debt specifically through Biden’s widespread relief plan — though other forms of student debt relief may be excluded. In a statement to Money, Wisconsin's Department of Revenue says student debt forgiveness would be taxed under current tax code, and the department does not have the authority to change it alone. Instead, it would require action from lawmakers. For now, the department says it plans to address the issue in an upcoming biennial budget request this fall, which is for the years [2023 to 2025](https://doa.wi.gov/Pages/StateFinances/CurrentBiennialBudget.aspx). "The legislature could take it up before then when they are back in session, which, as I understand it, won't be until January," Patty Mayers, spokesperson for the department, said in an email to Money. (A Tuesday report from Wisconsin's *[Journal Sentinel](https://www.jsonline.com/story/news/education/2022/08/30/student-loan-forgiveness-plan-may-mean-higher-tax-bill-wisconsin/7904355001/)* suggests some state lawmakers may be opposed to changing the rule via legislation.) Arkansas and North Carolina — the two remaining states — have not publicly stated whether canceled student loans under Biden’s plan will be taxable, but they do not have clear rules that would exclude student debt forgiveness from taxable income. Like Wisconsin, those states may have to pass legislation to exempt loan forgiveness from taxes. (This could also happen in Mississippi and Minnesota.) Walczak shared an updated estimation of how much taxpayers could owe in the various states, assuming $10,000 of forgiveness: - **Arkansas**: Most borrowers would have to pay $490 in state taxes. - **Minnesota**: Borrowers would most likely owe $680, but it could range as high as $985. - **Mississippi:** $500 for those earning more than $10,000. - **North Carolina:** $499 for all taxpayers. - **Wisconsin:** $530 for most taxpayers. As high as $765. ## If you owe more than $10,000 in taxes, Tax Relief can allow you to break down your debt into payments ### Anthem Tax Relief provides a full menu of tax relief services to help clients get out from under the yoke of tax debt. [Get Started](https://money.com/pr/u8c9d1d14e7a?ap_referrer=%2Fstudent-loan-forgiveness-state-taxes%2F) The revenue departments of Arkansas and North Carolina did not respond to Money's request for clarity. However, Arkansas' Department of Financial Services told Bloomberg that the agency is reviewing the matter. The Tax Foundation first published a widely cited analysis Friday that found 13 states have the potential to tax discharged student loans, but the organization updated the list on Tuesday and Wednesday with a smaller list of states. Walczak says the initial analysis was based on outdated tax code information. “Since original publication, a number of states have indicated that they will address this administratively or believe they have flexibility of interpretation under existing law,” he added in an email to Money. *This article was updated on Aug. 31 to include a statement from Wisconsin's Department of Revenue.* ```json { "@context": "https://schema.org", "@graph": [ { "@type": "BreadcrumbList", "@id": "https://money.com/student-loan-forgiveness-state-taxes/#breadcrumb", "itemListElement": [ { "@type": "ListItem", "position": 1, "name": "Home", "item": "https://money.com" }, { "@type": "ListItem", "position": 2, "name": "Personal Finance", "item": "https://money.com/personal-finance/" }, { "@type": "ListItem", "position": 3, "name": "Student Loan Debt", "item": "https://money.com/student-loan-debt/" }, { "@type": "ListItem", "position": 4, "name": "These 5 States May Tax Your Student Loan Forgiveness" } ] }, { "@type": "WebSite", "@id": "https://money.com/#website", "url": "https://money.com", "name": "Money", "publisher": { "@id": "https://money.com/#organization" } }, { "@type": "WebPage", "@id": "https://money.com/student-loan-forgiveness-state-taxes/#webpage", "url": "https://money.com/student-loan-forgiveness-state-taxes/", "name": "These 5 States May Tax Your Student Loan Forgiveness", "isPartOf": { "@id": "https://money.com/#website" }, "datePublished": "2022-08-31T17:53:13.000Z", "mainEntity": { "@id": "https://money.com/student-loan-forgiveness-state-taxes/" }, "inLanguage": "en-US", "breadcrumb": { "@id": "https://money.com/student-loan-forgiveness-state-taxes/#breadcrumb" }, "dateModified": "2022-09-01T15:40:51.000Z" }, { "@type": "NewsArticle", "headline": "These 5 States May Tax Your Student Loan Forgiveness", "articleSection": "Personal Finance", "image": [ { "@type": "ImageObject", "url": "https://img.money.com/2022/08/News-States-Tax-student-loan-forgiveness.jpg?crop=0px%2C129px%2C2880px%2C1620px&quality=85", "width": 1012, "height": 569, "caption": "News-States-Tax-student-loan-forgiveness" } ], "author": [ { "@type": "Person", "name": "Adam Hardy", "url": "https://money.com/author/adam-hardy/", "@id": "https://money.com/author/adam-hardy/#author", "description": "Adam Hardy is a lead data journalist at Money, where he frequently reports on financial barriers that affect low-income Americans. 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