LPT: If you're planning to apply for/accept Biden's Student Loan Forgiveness, be aware that some states may TAX it as income!

Submitted by Anachronisticpoet t3_y7dm9w in LifeProTips

Arkansas, California, Indiana, Minnesota, Mississippi, North Carolina and Wisconsin currently have laws that allow debt relief to be taxed. They may adjust the laws to make an exception for this program, but be prepared in case they don't. You could be taxed up to $500 on your debt relief.

California, for example, is in the process of adjusting this, but nothing is set in stone.

"It depends on state conformity with federal laws, including the provision from the American Rescue Plan of 2021 that makes student loan forgiveness federally tax-free through 2025."

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For more information and an estimate of possible taxes per state, read here.

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Comments

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Phillyredsox t1_istwm6s wrote

Can we just once have something that doesn’t secretly fuck us?

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[deleted] t1_isu0s9c wrote

[deleted]

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Phillyredsox t1_isu3qr6 wrote

Is that if you get the $20,000?

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mokeyss t1_isum35h wrote

Either way state mileage may vary. It would be as a state income tax based on what that person is saying. That means in Mass it would be taxed at 5%.

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flightwatcher45 t1_iswjcbi wrote

Scary you have student loans and can't figure it out lol.

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Phillyredsox t1_isxmqrf wrote

Who said I had student loans?

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flightwatcher45 t1_isxn2r1 wrote

Even if you don't, I was joking that you should be smart enough to know. It was a joke. If you walk way with 9500 after tax do you think you got 10k or 20k initially? And yes it depends on a few variables but it should be clear.

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Phillyredsox t1_isxv623 wrote

And my comment was an exaggeration on the over taxed middle and lower class population of the US.

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flightwatcher45 t1_isy2o05 wrote

Haha. Yep, now us tax payers get to pay the loans off.

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Phillyredsox t1_isy4rp3 wrote

If they would just tax the rich this wouldn’t be a problem.

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flightwatcher45 t1_isy6j3x wrote

That's a slippery slope but I agree to an extent. We shouldn't need to tax the rich differently, if we had a system that was somehow balanced.. There is no easy solution to all the issues in our economy, especially we can all agree on! I paid my loans, got a good job, get paid well and have more than most so I try not to complain.

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thenick_ttu t1_isur3ax wrote

Having $10,000 of debt (that you agreed to payback) be forgiven and having to pay tax, is being fucked? How fucking entitled can a person be?

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machina99 t1_istxfyh wrote

You new here?

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Phillyredsox t1_istz9tn wrote

No. But I don’t know how much more my unlubed butthole can take.

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Tigen13 t1_isu1jz1 wrote

The IRS says you will take it all and like it

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Phillyredsox t1_isu3opc wrote

Are they going to provide diapers for my loose stool?

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machina99 t1_isuaq5u wrote

Sure, but the cost of the diapers is going to be taxed to you as income

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Tigen13 t1_isuc1jy wrote

Definitely. Ain't giving no handouts here.

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flightwatcher45 t1_iswjk1x wrote

Pay the loans off as you agreed and you don't have to worry about being taxed for the credit

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Phillyredsox t1_isxmpjd wrote

I won’t get taxed I’m not in those states. And also they were predatory loans most of which were probably signed under duress or falsehoods so just like any other contract they should be null and void.

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flightwatcher45 t1_isxnf2l wrote

Huh, I just made payments. Be careful when taking loans! I think they should require a short class when taking a loan that explains it, even just an hour or two as some college kids have no clue.. shit half adults dont.

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Phillyredsox t1_isxv1o2 wrote

And that’s the largest part of the problem. People don’t know. And once you turned 18 you can sign anything and it is binding most of the time.

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historycat95 t1_isu113r wrote

Amd if that's the case where you live vote accordingly.

By the time forgiveness comes a different state legislature and governor could eliminate that problem.

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Mythic-Insanity t1_isuez3o wrote

I wouldn’t be too worried about the taxes tbh, more than likely they’ll find a way to weasel out of actually forgiving anything.

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Spiritmolecule30 t1_isuxjup wrote

Are people able to start applying yet or still waiting on Joe to fill in his word?

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wolfie_muse t1_isvduxq wrote

Promise made, promise kept. This is only the beginning

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junzilla t1_isvf9dm wrote

Waiting on the 2k checks as promised

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wolfie_muse t1_isvfbxh wrote

You got one already. Or should have, at least.

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junzilla t1_isvf6y7 wrote

Remember to vote Democrat next week as a thank you to Daddy Biden.

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keepthetips t1_istv99p wrote

Hello and welcome to r/LifeProTips!

Please help us decide if this post is a good fit for the subreddit by up or downvoting this comment.

If you think that this is great advice to improve your life, please upvote. If you think this doesn't help you in any way, please downvote. If you don't care, leave it for the others to decide.

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flightwatcher45 t1_iswjhug wrote

Cry me a river haha. I'm the sucker who paid my loans off... and now I'm paying yours off!

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iarmit t1_isxsk3q wrote

I've heard this a lot, but I don't understand how it's the case.

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flightwatcher45 t1_isy2fcg wrote

I'm a tax payer. The loans just don't disappear.

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iarmit t1_it4fpwi wrote

Discharging debt means the debt no longer exists, like, specifically. So I'm not understanding how you're paying a loan that no longer exists. And not a single person making the same claim as you has any explanation for the claim, I'm hoping you do

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flightwatcher45 t1_it4h075 wrote

How about a bank loans you 100k of their money, therefor the money went from bank to your school. Govt now says your loan is discharged, meaning you don't have to pay it back. Now school has money, bank doesn't get repaid. Does that make sense?

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iarmit t1_it4hqsf wrote

So the fact that people have already paid back (in some cases) 2 or 3 times the total value of the loan, and still owe means the bank didn't get their money back?

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flightwatcher45 t1_it4j4b1 wrote

Well they didn't get it fully repaid. See banks/everyone wants to make money. If I loan you 100 bucks and we agree you'll pay me back 110 over 5 years but you stop after paying me 102 then I'm out 8 bucks. That is a cost to me and I've lost money because I could have loaned that money to someone else. I get loan rates may be high and unreasonable sometimes but I'm simply showing how a loan works. Now the banks aren't getting their money, like housing crash and lots of banks fail or govt prints money and pays them back, leading to inflation. School loan probably won't close any lenders but eventually that money comes out of somebody's pocket.

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iarmit t1_it4k3e1 wrote

But it's not the bank, right? It's the government with tax money. That's why you're saying your paying off those loans. But if all that is being written off is the excess interest, as most folks have already paid back more than the value of the loan, there is nothing else the government would have that other people need to "pay back" in someone else's place.

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flightwatcher45 t1_it4ozet wrote

Trust me, if a 10k or 20k value is being discharged that's not imaginary money, it was owed to someone. The loan repayment amount, even whats above whats being borrowed, was the agreed repayment. Let me show you, venmo me 100 bucks, I promise to pay you back 200 over the next 15yrs.

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iarmit t1_it4x0pv wrote

Okay, so you don't have any reasoning to back up your "I'm paying off their loans" beyond talking points and "trust me". Thank you anyways, and no hate, I was just hoping someone could actually explain it. It's okay if they can't (as we very obviously disagree on the idea of lessening economic hardships when it comes to people and not corporations).

Sorry, I don't know how to mark this as "I'm not being sarcastic and I really do politely mean we'll just have to agree to disagree". I do thank you for your responses

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flightwatcher45 t1_it4yc4h wrote

I hear you. We all pay man. A company didn't get paid, govt will reimburse and we all, most, pay taxes. Our national debt will go up.. Nothing is free in life lol. And lots of people make payments and doing fine that get the discharge. Google who pays for student loan forgiveness. I had almost 6 figures of student debt, got a good job, read the fine print and paid it off. Now govt is essentially handing out 10 20k.. I want my free money!

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wolfie_muse t1_isw4ano wrote

Hope the wife’s gets approved. I believe hers was close to the cap. The school lost accreditation but stayed open for a while, but teachers started leaving, and without accreditation, a degree is only a piece of paper really. She dropped out around the same time the school closed

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