Virginia is not going to tax as earnings scholar loans forgiven beneath a brand new plan introduced by President Joe Biden final week, in response to representatives of two state companies.
“The quantity of scholar mortgage debt that was forgiven will probably be unnoticed of federal adjusted gross earnings, and, by extension, Virginia taxable earnings, with none additional motion by the Normal Meeting,” wrote Stephen Kindermann, a finance lawyer within the Virginia Division of Legislative Providers, in response to an inquiry from Del. Marcus Simon, D-Fairfax.
Heather Cooper, a spokeswoman for Virginia Division of Taxation, additionally mentioned in an e-mail that “to the extent that scholar loans forgiven via the just lately introduced scholar mortgage forgiveness program are exempt from federal taxation … they might not be taxable on the Virginia earnings tax return.”
A number of nationwide information stories have listed Virginia as one among roughly a dozen states the place residents who’ve some or all of their scholar loans forgiven beneath the brand new coverage might nonetheless be topic to state taxation of the forgiven loans.
However Virginia in 2022 conformed a part of its tax code to a provision of the American Rescue Plan Act that excluded scholar loans which have been forgiven from being taxed as gross earnings via 2025.
Simon mentioned confusion was seemingly linked to Virginia’s choice to not conform its state tax code with all facets of the federal tax code.
Nonetheless, he mentioned that not solely had the state adopted the federal authorities on the mortgage forgiveness exemption, however fiscal affect estimates had accounted for the ensuing lack of state revenues.
Beneath the coverage introduced by Biden Wednesday, as much as $20,000 in federal scholar mortgage debt will probably be canceled for Pell Grant debtors, and as much as $10,000 will probably be canceled for all different debtors whose earnings is lower than $125,000 for a person and $250,000 for a family.
