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Louisiana Tax Implications of Federal Student Loan Forgiveness

September 21, 2022 10:48 AM | Chelsey Blakenship (Administrator)

The Louisiana Department of Revenue recently put out a bulletin clarifying the Louisiana tax implications (individual income tax) of federal student loan forgiveness announcement.

On August 24, 2022, President Biden announced a plan that, in part, provides up to $20,000 in student loan forgiveness to Pell Grant recipients with loans held by the U.S. Department of Education and up to $10,000 in student loan forgiveness to non-Pell Grant recipients. Taxpayers who have either a federal filing status of single and earn less than $125,000 or a federal filing status of married filing jointly and earn less than $250,000 are eligible for the federal student loan forgiveness.

For individual taxpayers in Louisiana, the starting point for determining Louisiana’s tax table income is the taxpayer’s “adjusted gross income” (“AGI”), which is defined as the adjusted gross income of the individual for the taxable year that is reportable on the individual’s federal income tax return. Because Louisiana largely conforms to federal tax law for purposes of individual income tax, amounts that are exempt from federal tax, and therefore not includable in the taxpayer’s adjusted gross income, will automatically be exempt from Louisiana tax without further action. As such, for taxpayers qualifying for federal student loan forgiveness pursuant to President Biden’s plan, any amounts so forgiven will likely be automatically excluded from a taxpayer’s AGI and exempt from Louisiana tax.

*Source: Louisiana Department of Revenue

P.O. Box 1924
Baton Rouge, LA 70821

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