Several states are moving ahead to exempt residents from being taxed on forgiven student loan debt under President Joe Biden’s relief plan, while Mississippi has decided against the exemption, Bloomberg News reported. New York, Pennsylvania, Kentucky, Virginia, Hawaii, and Idaho are the latest states to exempt their residents that qualify under Biden’s plan from state income tax. Others—Arkansas, California, Massachusetts, and South Carolina—are still reviewing whether debt forgiveness will be subject to taxation. The canceled debt will be subject to income taxes in Mississippi, the state Department of Revenue confirmed. As debt cancellation is generally considered income, the federal government exempted student loan debt forgiveness between 2021 and 2015 from federally taxable income. But more than a dozen states don’t fully conform to that provision of the American Rescue Plan Act and have the option to collect taxes. Nonconforming states would have to issue guidelines or pursue legislative action to prevent residents from ending up paying between $500 and $1,100 in state taxes for the 2022 tax year. However, most legislatures have adjourned for the year.
