If you live in North Carolina or Mississippi and had your student loans forgiven, you will have to pay state taxes because they consider it taxable income, Business Insider reported.
While the student loan forgiveness plan, which will eliminate $10,000 from everybody who has outstanding federal student loans, is not taxed federally, at least 13 states have not adopted Section 108(f)(5) of the Internal Revenue Code, which states student loans forgiven between 2015 and 2021 are not taxable income.
The Tax Foundation noted that several states, including California, New York, and Hawaii, have already announced that they will not levy state taxes on any canceled student loan debt. However, residents in several other states, such as Arkansas, Minnesota, and Wisconsin, may also be on the hook for the taxes unless state legislators act to exempt canceled student loans.
A spokesperson for Wisconsin's Department of Revenue told Business Insider that state officials with lawmakers on the issue.
"We will certainly address this discrepancy with federal law in our upcoming biennial budget request in an effort to ensure Wisconsin taxpayers don't face penalties and increased taxes for having their loans forgiven," the spokesperson said.
Ethan Miller, a certified financial planner and founder of Planning for Progress, told CNBC he expects most states will update their tax codes before the end of the year to ensure borrowers are not taxed if their loans are forgiven.
"No one wants to be the state taxing student loan forgiveness," he said. "I expect we'll see at least a few more clarify their position."