Mississippi has become the first state to confirm plans to tax forgiven student loan debt.
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Mississippi is planning to tax residents’ forgiven student loan debt, per Bloomberg.
Debt cancellations are usually considered as taxable income unless an exemption is made.
More states could subject forgiven student loan debt to income tax.
Mississippi is planning to tax residents’ forgiven student loan debt as income, its Department of Revenue confirmed to Bloomberg on Tuesday.
The Biden administration’s student loan forgiveness plan is exempt from federal tax but may still be subject to some individual state taxes, according to an analysis by the Tax Foundation.
The state’s decision is in contrast to those such as New York, Virginia, and Pennsylvania, which have introduced tax exemptions for residents who qualify for the debt forgiveness, per Bloomberg. Debt cancellations are usually considered as taxable income unless exemptions are made.
Mississippi’s Department of Finance & Administration did not immediately respond to Insider’s request for comment on the decision made outside of normal working hours.
A provision in the final text of the American Rescue Plan Act ensured that forgiven student loans between 2015 and 2021 would not be included as taxable income. But more than 13 states, including Mississippi, are not bound to fully uphold the clause when it comes to state tax, per the Tax Foundation.
More states, including Arkansas and Wisconsin, could also tax forgiven student loan debt.
Representatives for Arkansas’ and Wisconsin’s revenue departments did not immediately respond to Insider’s request for comment.
Arkansas’ Department of Finance and Administration told Bloomberg it was “reviewing whether debt forgiveness in this scenario, via executive order, is subject to state income tax in Arkansas.”
The department added it would decide on student loan tax in the next few days.
The Wisconsin Department of Revenue told Bloomberg it would address the subject in its upcoming biennial budget.