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Forgiven student loan debt won’t be taxable income for Michiganders

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The Michigan Treasury says student loans that are forgiven under a federal program won’t be taxed as income. The state tax collection department posted that message in an official bulletin Wednesday.

Typically, forgiven loans are treated as income under state and federal tax laws, which would potentially add thousands of dollars in taxable earnings for people who take advantage of the program. But a federal law makes forgiven student loans tax-exempt. That means they’re also exempt from Michigan income taxes, which are based on federal taxable income.

“We’re encouraging everyone to participate in every student loan forgiveness program they’re eligible for and, you know, that’s going to impact we estimate about 1.4 million Michiganders who are holding some level of student loan debt,” said Lieutenant Governor Garlin Gilchrist.

He said that includes roughly 150,000 government, military and not-for-profit organizations workers covered by the Public Service Loan Forgiveness Program.

In some states — including Indiana — student debt relief is taxable income.

Rick Pluta is Senior Capitol Correspondent for the Michigan Public Radio Network. He has been covering Michigan’s Capitol, government, and politics since 1987.
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