Some student loan relief is taxable for Indiana residents





INDIANA – Recipients of the Biden-Harris Administration’s Student Debt Relief Plan to forgive up to $20,000 of student loan debt will need to pay state and local taxes on the amount forgiven under IC 6-3-1-3.5(a)(30).

Taxpayers will be required to include the amount of general student loan relief in their Indiana adjusted gross income (AGI). Instructions on how to do this using Add-back Code 150 will be included in tax instruction booklets and software for the 2022 tax year.  

When the American Rescue Plan Act (ARPA) expanded IRC section 108(f)(5), excluding student loan discharge under certain circumstances from federal gross income, the Indiana General Assembly passed a law decoupling Indiana from that provision in the IRC and it enacted a state provision requiring Hoosier taxpayers to add back the excluded amount to their Indiana AGI.

In 2022, this provision was clarified retroactively to provide that discharges resulting from total and permanent disability, death, or bankruptcy were not required to be added back. That law, IC 6-3-1-3.5(a)(30), still stands, even though the Biden-Harris Administration’s Student Debt Relief Plan is not part of ARPA.