Mississippi plans to tax student loan forgiveness

[Ombligo]

Mississippi is the first state to announce the forgiven debt will be taxed as income. Other states, including Arkansas and Wisconsin, are expected to do the same. the federal government will not be taxing it, but states aren't bound to follow suit.

So if you had the median debt amount of $17k forgiven, you will be on the hook for around $700 (4% state tax rate).

https://www.businessinsider.com/mississi...low-2022-8

[anonymouse1]

Slime.

[Numo]

Anything to stick it in Joe’s eye. This ought to endear state politicians to voters with college debt.

[RgrF]

Ammo wrote:
Anything to stick it in Joe’s eye. This ought to endear state politicians to voters with college debt.

Probably not in issue in Mississippi.

[Acer]

Technically their prerogative, but still a d*ck move.

Forgiveness is on paper, but taxes are paid in cash. I don't know about these states, but in PA it's a flat tax so refunds are minimal, you can't just reduce the refund to cover it.

They should make the forgiveness hit on January 1, 2023 to give time to kick it into the next year to give time to plan.

[$tevie]

Maybe Mississippi would like the money so that they can fix the water problem in Jackson.

j/k

[Lemon Drop]

Not just Mississippi :

"Factoring in $10,000 of debt relief, below is the maximum tax liability student-loan borrowers could face in the 13 states identified by the Tax Foundation:  

Arkansas: $550Hawaii: $1,100Idaho: $600Kentucky: $500Massachusetts: $500Minnesota: $985Mississippi: $500New York: $685Pennsylvania: $307South Carolina: $700Virginia: $575West Virginia: $650Wisconsin: $530 

Those tax liabilities could double for borrowers who receive up to $20,000 in debt forgiveness, Walczak noted."

https://www.cbsnews.com/news/student-loa...ssissippi/

[Bill in NC]

Are the feds issuing 1099s?

If not there's no way for a state to know about it.

https://www.mcglinchey.com/insights/irs-...ischarges/

[mattkime]

Hm, while it seems like a 'jerk move' apparently this is how debt forgiveness is treated under the tax code. I'm not sure if its always a jerk move, maybe some rich people get a lot of loans forgiven.

[JoeH]

Depends on how the debt cancellation is handled. Some methods leave the person whose debt was forgiven with an implied income that can be taxed. Other methods don't. That is one area that takes an accountant or legal professional to determine the best way to have a debt cancelled and not incur a tax liability.