Consistent with legislative leaders’ endorsement, Californians who receive federal student loan forgiveness will not have to pay state taxes on the amount forgiven under President Biden’s program.
Sacramento – President Biden’s student debt relief is not subject to state taxes.
Today, Gov. Gavin Newsom called on Congress to take early action to ensure that federal student debt relief provided to Californians is not subject to state taxes. The proposal will be part of the governor’s budget, which will be released in January.
“California residents who are exempt from student debt should not be taxed. This will result in tax relief of up to $1.3 billion for more than 3.5 million Californians,” Governor Newsom said. increase. “We look forward to working closely with Congress to make this happen through early action.”
There are approximately 3,550,000 eligible borrowers in California, of which an estimated 2,340,600 are Pell Grant borrowers. According to estimates, Californians could receive up to $1.3 billion in relief by waiving state taxes on forgiven student loan debt. Individual borrowers save hundreds of dollars in state taxes on average, potentially as much as $1,860.
Under President Biden’s proposal, the federal government will waive up to $10,000 in student loans for individuals earning less than $125,000 a year and those who received a Pell Grant targeted at students with the greatest financial need. exempt up to $20,000 for Also, President Biden’s America Bailout Plan exempts student loan debt forgiveness from federal income taxes from 2021 through his 2025.