What Biden’s new student loan forgiveness plan means for your taxes [Video]

Student loan forgiveness is federally tax-free through 2025 — thanks to a provision from the American Rescue Plan Act of 2021. Biden wants to make that policy permanent, according to his 2025 fiscal year budget. But the future taxability of student loan forgiveness is unclear.

If Biden’s new plan is finalized as proposed and borrowers receive cancellation before 2026, the forgiven balance won’t incur federal taxes.

However, some borrowers could still see a state tax bill, according to Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida.

Many states have conformed to federal rules on the taxability of student loan forgiveness. But borrowers shouldn’t assume there won’t be state liability, he said.

“You need to take that into account and understand what your state …