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LDR RIBs Student Loan Forgiveness and Military Pay Exclusion

September 15, 2022

Louisiana Tax Implications of Federal Student Loan Forgiveness

On August 24, 2022, President Biden announced a plan that, in part, provides up to $20,000 in student loan forgiveness to Pell Grant recipients with loans held by the U.S. Department of Education and up to $10,000 in student loan forgiveness to non-Pell Grant recipients. Taxpayers who have either a federal filing status of single and earn less than $125,000 or a federal filing status of married filing jointly and earn less than $250,000 are eligible for the federal student loan forgiveness. The purpose of this bulletin is to explain the effect any federal student loan forgiveness may have on individuals subject to Louisiana individual income tax.

Military Pay Exclusion from Louisiana Individual Income Tax

Act 161 of the 2021 Regular Session of the Louisiana Legislature changed the state income tax exemption amount from $30,000 to $50,000 for certain military personnel beginning in tax year 2022. Taxpayers who served 120 or more consecutive days on full-time active duty as a member of the United States armed forces are allowed an exemption of up to $50,000 for compensation paid by the armed forces while stationed outside of Louisiana.

Questions about the content of this Alert should be directed to LCPA State Government Relations Director Linda Babin.