The White House has indicated that President Biden’s recent student loan forgiveness will be excluded from federal income tax due to the student loan forgiveness exemption contained in IRC 108(f)(5). See FACT SHEET: President Biden Announces Student Loan Relief for Borrowers Who Need It Most – The White House. As part of the American Rescue Plan, Congress enacted Section 108(f)(5) of the Internal Revenue Code to expand the types of student loan forgiveness that would not be treated as taxable income for purposes of federal income tax.
The North Carolina General Assembly did not adopt Section 108(f)(5) of the IRC for purposes of the state income tax. Therefore, student loan forgiveness excluded pursuant to IRC 108(f)(5) is currently considered taxable income in North Carolina. See N.C. Stat. 105-153.5(c2)(22).
The Department of Revenue is monitoring any further enactments by the General Assembly that could change the taxability of student loan forgiveness in North Carolina.