If you’ve been impacted by the Rescue Act, and are a resident of Kansas or Missouri, you’re no doubt keeping an eye on the ever-evolving regulations considering student loan forgiveness. Our friendly professionals at Adams Accounting Solutions can help you understand tax implications that surface as a result of student loan forgiveness, and what you need to keep in mind.
So, what is the Rescue Act?
Signed into law in March 2021, the American Rescue Plan was designed to provide economic relief during the COVID-19 pandemic. Among its provisions, it included significant measures for student loan forgiveness. Specifically, this plan allows for student loan forgiveness received between January 1, 2021, and December 31, 2025, to be non-taxable at the federal level. That’s right — if your student loans are forgiven during this time, you won’t owe any federal income tax on that forgiven amount!
The Countdown: When Does the Rescue Act End?
The non-taxable status of student loan forgiveness under the Rescue Act is scheduled to end on December 31, 2025. So, if you’re eagerly awaiting a potential student loan cancellation, time is ticking! After that date, any forgiven student loans may become taxable income, which means you could face a hefty tax bill based on the amount that was forgiven.
What Missouri and Kansas Taxpayers Need to Know
While the federal government has laid out this exciting temporary benefit, it’s important for Missouri and Kansas taxpayers to understand how state laws might diverge from federal provisions. Here’s what we want you need to keep in mind:
Kansas
At this time, Kansas may not follow the federal exemption for forgiven student loans. The Kansas State Government hasn’t made any updates indicating they will follow this exemption, so be prepared for the possibility that forgiven loans could be considered taxable income on your state tax return. Keep in touch with us at Adams Accounting Solutions to understand local tax guidelines as you prepare to deal with your tax liability come tax time.
Missouri
Similar to Kansas, Missouri has not adopted the same non-taxable treatment for forgiven student loans that the federal level enjoys. This means that if you receive student loan forgiveness after December 31, 2025, you might still owe state income tax on any amount that gets forgiven. At Adams Accounting Solutions, we can help you keep an eye on updates from the Missouri state legislature, as policies could change. Be sure to contact us, we can help understand these complexities.
The Bigger Picture
The implications of student loan forgiveness are significant not just for your finances, but also for your future. If you qualify for forgiveness, make sure you’re keeping track of the timeline leading up to the end of the Rescue Act (December 31, 2025.) Consult with our professionals at Adams Accounting Solutions, and we will provide you with personalized advice based on your unique financial situation.
Navigating the world of student loan forgiveness and tax implications may feel like trudging through quicksand, especially when laws change and deadlines loom. But with the right information and a keen awareness of your state’s tax policies, you can make informed decisions that help you save money in the long run.
As we move closer to the end of 2025, keep in touch with us to stay proactive and informed. Adams Accounting Solutions believes your financial future is worth it!