Residents of New York, Virginia and eleven other states could end up with a surprise tax hit of hundreds of dollars next year on forgiven student loans.
President Joe Biden’s announcement that the government would forgive some student debt for individuals earning less than $125,000 was welcome news to many carrying large loan balances. But 13 states have laws that treat this forgiven debt as income, meaning that it’s subject to state levies on earnings.
That means that taxpayers in those states with $10,000 in forgiven debt could end up owing a few hundred extra dollars — or in Hawaii more than $1,000 — on their state tax returns next April.
