Sep 6, 2022 - Economy

Indiana the latest state to confirm it will tax student loan forgiveness

Photo of Joe Biden speaking with his hands folded between him

President Biden delivers remarks during a Cabinet meeting at the White House on Sept. 6. Photo: Kevin Dietsch via Getty Images

Indiana became the latest state Tuesday to confirm that it will tax student loan forgiveness, AP reports.

Why it matters: As the Biden administration sets out to implement its sweeping student loan forgiveness plan, some states have indicated that residents could face a state tax on the balances forgiven. Mississippi and North Carolina previously confirmed that forgiven student loans are considered taxable income.

Driving the news: Indiana's tax rate is currently 3.23%, meaning those eligible to have their debt canceled will pay up to $323 or $646 in taxes depending on the amount of student loan forgiveness they qualify for, per AP.

  • Residents will also have to pay county taxes for the forgiven balances.

The big picture: Other states such as Minnesota, Wisconsin and Arkansas will also tax forgiven balances unless they change their laws to adhere to a federal tax exemption for student loans, according to the independent tax policy nonprofit Tax Foundation.

  • Relief would largely depend on each state's legislature.
  • Indiana House Speaker Todd Huston (R) told AP he expects conversations about the state policy "to continue as we head into the next legislative session," which will begin in January.

Worth noting: New York, Pennsylvania, Kentucky, Virginia, Hawaii and Idaho are among the states that have confirmed they will exempt from income taxes residents whose student loans qualify for debt cancellation, Bloomberg reports.

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