Posted on 08/28/2022 5:11:16 PM PDT by Lazamataz
Residents of 13 states who receive debt forgiveness from the federal government for their student loans may need to pay some state taxes on their forgiven amount, according to an analysis by the think tank Tax Foundation.
Jared Walczak, the vice president of state projects for the Center for State Tax Policy at the think tank, said in a blog post on Thursday that loan forgiveness is generally considered to be equivalent to income and is therefore taxable.
Walczak said that the American Rescue Plan, the $1.9 trillion package that President Biden signed into law in March 2021, exempts the forgiveness of student loan debt from 2021 to 2025 from federal income taxes.
States that follow the federal government’s lead will also exclude debt forgiveness, but not all states do.
Biden announced on Wednesday that the federal government would forgive up to $10,000 in student loans for individuals making less than $125,000 per year and up to $20,000 for those who received a Pell Grant, meant for students with the largest financial need.
(Excerpt) Read more at thehill.com ...
Arkansas, Hawaii, Idaho, Kentucky, Massachusetts, Minnesota, Mississippi, New York, Pennsylvania, South Carolina, Virginia, West Virginia and Wisconsin...
Funny.
1) Hooray, I’m rich. Don’t gotta pay nothing for my colludge dugree every month.
2) Uh, oh. Owe plenty on US taxes due right away.
3) Something’s goin’ on my block. Three SWAT trucks and all those guys armed with automatic weapons. Wonder where the criminal is holing up? Don’t see no bad lookin’ dudes.
Hey, it’s me. They’re from the IRS. “Hey, guys, I always voted Dem....”
(plops on the floor riddled with bloody holes)
Do the freeloaders get that bill in the mail? Beauty.
It’s more than this. Debt forgiveness is considered taxable income by the IRS, unless it is given because of the debtor’s inability to pay. My understanding of this program is there is no analysis of ability to pay. Interesting to see how Biteme’s weaponized IRS will respond to this.
Or electronically deducted from their bank account. Surprise, surprise, surprise!
I assume they will pay it on their state tax returns.
That’s interesting news. If the loan receivers have to pay taxes on their overdue loans, and I as a taxpayer am covering their loss at that point sans the taxes, then I want a refund of the taxes they are paying as I am paying for their loan and I want a tax credit for the money the government is taking from them they are then overcharging me to cover the actual loan. If the tax is covered, I don’t pay for it. And the tax credit would be a donation to a government entity under NAF and can be written off.
It won’t be all of it, but it’ll be mine none the same.
wy69
I hope they choke on it.
“”Interesting to see how Biteme’s weaponized IRS will respond to this.””
That’s why they need 87,000 new IRS agents - to SORT out the people who applied for and received debt forgiveness and lose them in the process of collecting federal taxes. Then the states will be left to deal with the deadbeats. These people aren’t getting loans to go to college to study economics or business hence, they are going to be left clueless and cry FOUL....
Pa is a 3.01% state income tax…big deal, they pay $300 next year while you and I pay the rest.
We’re still the ones getting screwed.
Oh noes.
They have to pay a percentage of the full loan they took out in taxes. And this is still a good thing?
This seems like an unConsititional “Bill of Attainder” in that a certain group is punished, while another arbitrary groups is rewarded without Due Process
Serve America, get rewarded.
I haven’t heard of anyone trying to stop this lunacy.
Everyone who did not take out a Government student loan is going to pay for this. Ridiculous!!!
the creditor sends you a 1099-C for the amount of the forgiven debt.
Insolvency is one reason you may use to exempt yourself from the state tax. Insolvency per the IRS means that your total debt obligations exceed your total assets.
Minnesota is a for sure.
the feds probably wont report it to the states and it well get shuffled under the radar.
Sounds like the Dem way.
Supposedly some Federal Law excludes this action from the general rule that forgiven debt is deemed income.
Pennsylvania’s income tax is an earned income only tax. It’s not likely to require any payment on a loan forgiveness.
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