South Carolina residents who receive student loan forgiveness through a plan recently announced by President Joe Biden will not be taxed for it, according to the S.C. Department of Revenue.
In a statement dated Sept. 1, the DOR said residents will not be taxed because in May, the S.C. General Assembly adopted Internal Revenue Code (108) (f) (5), which describes how student loans that receive forgiveness at the federal level are excluded from federal taxable income. The code was temporarily revised under the American Rescue Plan of 2021 to add special rules for the discharge of student loans through 2025.
“To the extent a student described in IRC Section 108 (f) (5) is forgiven for federal income tax purposes and excluded from federal tax income, then the amount is also excluded from South Carolina taxable income,” the statement read.
In mid-August, President Biden announced the cancelation of $10,000 in federal student loans. The cancelation applies to those who earn less than $125,000 a year or $250,000 for couples who file jointly. Pell Grant recipients are also eligible for an additional $10,000 in relief.
To learn more student loan cancellation, visit https://studentaid.gov/debt-relief-announcement/one-time-cancellation