Indiana to Tax Forgiven Student Loans, Breaking From Most States

Indiana will tax student loan forgiveness after the state legislature decoupled from a federal provision exempting such debt discharge from income tax.

Residents eligible for federal student loan forgiveness under President Joe Biden’s relief plan will pay up to $323 in state income tax for $10,000 in debt cancellation, the state’s Department of Revenue said Tuesday. Pell Grant recipients, who are eligible for up to $20,000 in forgiveness, will pay up to $646 in taxes.

Forgiven student loan debt won’t be considered federal taxable income, but states such as Indiana and Mississippi will apply their state income tax. Indiana is ...