Massachusetts and 12 other states could tax federal student loan forgiveness, report says
By Mike Sullivan, WBZ-TV
BOSTON - Millions of Americans are waiting patiently to see when the federal government will forgive $10,000 to $20,000 in federal student loan debt. For people in 13 states, that relief may come at a cost.
"It would be an ordinary income tax potentially," explains Mark Scribner, Private CFO and Managing Director at Oxygen Financial, "They are still trying to work through the language on the federal side to see if that is actually applicable to Massachusetts residents."
Massachusetts is one of the states that may place an income tax on the debt forgiveness. People are eligible for federal loan forgiveness if they make under $125,000 as an individual, or $250,000 if filing as a couple.
As it stands right now, $10,000 would amount to about $500 in Massachusetts state taxes. Hawaiians face the steepest tax charge at $1,100 for $10,000.
Local legislators are working on a plan to address the issues.
"Governor Charlie Baker, a couple of days ago, said they are trying to get the language from the Heroes Act to figure out if it's a taxable event," added Scribner, "We are waiting for guidelines from Massachusetts if there is going to be an additional form or something in someone's tax return."
If relief does come, Scribner suggested people hold off spending their newfound savings. He encourages people to use the money to pay off any remaining debts.
"I'm sure we will hear some stories of people taking that dream vacation on the extra money and spend craze," said Scribner, "Create a budget, list out the debts, and try to put the highest interest rates at the top, and develop a plan."
