Back in 2018, I was unemployed for eight months. Come April of 2019, I learned that while California doesn’t tax unemployment checks, the federal government does.
That meant that after a year on the edge of poverty, I suddenly had a $1,400 federal tax bill to pay. This was money that was supposed to help me. Instead, it became a burden.
If student loan forgiveness is taxed, that will be a similar hardship for millions of Americans, except with the federal and state roles switched: California could become one of the states that will tax the federal government’s student loan debt relief program of up to $20,000 per individual. That would cost those debt relief recipients hundreds of dollars in taxes next year.
