Indiana is the latest state to confirm plans to tax student loan forgiveness, leaving some residents with a bill of over $300
Chuck Savage/Getty Images
- Indiana is the latest state to confirm it will tax forgiven student loan debt as income.
- Eligible residents will face a tax bill of around $300, Indiana's Department of Revenue said.
- Other states, including Mississippi and North Carolina, announced similar plans last week.
Indiana on Tuesday became the latest state to confirm it will tax forgiven student loan debt as income, meaning substantial tax bills for thousands in the state.
The state's Department of Revenue confirmed the plans to the Associated Press on Tuesday.
Those eligible to receive $10,000 in federal loan forgiveness in Indiana will end up paying $323 in taxes, communications manager, Natalie Rodriguez, told the news agency in an email. Pell Grant recipients will owe double this amount, she added.
Indiana residents eligible for the student loan relief will also face additional county taxes on the forgiven debt, per the AP.
Representatives for Indiana's Department of Revenue did not immediately respond to Insider's request for comment, made outside normal working hours.
The decision follows in the footsteps of other states, including Mississippi and North Carolina, which announced similar plans last week.
Forgiven loans are traditionally considered taxable income in the US, but the Biden administration took steps in the American Rescue Plan to ensure that student loan forgiveness wouldn't rack up a federal tax bill. However, the debt relief is still triggering some individual state tax laws and leaving eligible residents with an extra tax bill of several hundred dollars.
Indiana's plans escaped some analysts' predictions.
This month, research from the Tax Foundation, a Washington D.C.-based think-tank, predicted that just five states were likely to tax the student loan relief — Arkansas, Wisconsin, Mississippi, Minnesota, and North Carolina.
Representatives for Wisconsin and Minnesota told Insider that without state legislative approved changes, both states were on track to tax the loan forgiveness.
A representative for Arkansas Gov. Asa Hutchinson told Insider the state's Department of Revenue was still considering whether it will tax the debt relief.