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The Biden administration’s plan to reduce student loan burdens by $10,000 could come with a catch for some Americans — they’ll be expected to pay taxes on the savings.
That’s the upshot of an analysis by the Tax Foundation, a nonpartisan think tank, that says some beneficiaries of the Biden loan plan could be on the hook for as much as $1,100 in taxes.
The White House has said that the forgiven portions of student loans will not be considered taxable income for the purposes of federal income tax, and most states follow federal guidance on such discharged debt.
But 13 states — including New York — may break from the federal government and consider the discharged debt as taxable income.
The Tax Foundation analysis estimates that borrowers in Hawaii could face the highest maximum liability if the state decides to tax the reduction — as much as $1,100, depending on the borrower’s tax bracket.
