President Joe Biden’s student loan forgiveness program has sparked a flurry of questions, including its impact on inflation and whether it’s fair to saddle some taxpayers with the burden of paying off others’ debts. Now the Tax Foundation has raised another—will it trigger tax liabilities for beneficiaries of the scheme?
Taxpayers will absorb up to $10,000 in outstanding student debt for individual borrowers earning less than $125,000 per year or $250,000 for married joint filers under Biden’s plan, with the amount forgiven doubling to $20,000 for Pell Grant recipients.
While the debt wipeout is free of federal taxes, some states have laws that treat the canceled debt as taxable income, according to Jared Walczak, vice president of state projects at the Tax Foundation….