Vermont Taxes

September 27, 2022

Vermonters who qualify for a reduction in their student loan debt will get another break from the state: The loan forgiveness won’t be taxed.

Debt forgiveness is typically counted as income and taxed by both federal and state governments. People who negotiate debt reduction with credit card companies are sometimes surprised to learn they owe income taxes on the amount written off.

Before President Joe Biden announced his student loan forgiveness plan, the American Rescue Plan Act (ARPA), passed in 2021, anticipated the tax consequences of such a proposal. Under ARPA, federal student loan debt forgiven through 2025 is not be counted as federal taxable income.


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