6 states that could tax your student-loan forgiveness as income

• Biden's student-loan forgiveness will not be subject to federal taxes, thanks to the American Rescue Plan.
• But the Tax Foundation predicts it could be subject to state taxes in six states, some of which have confirmed.
• That's due to differing tax codes and how states choose to align with federal policies. 

If you qualify for President Joe Biden's student-loan forgiveness, the relief might be taxable — depending on where you live.

In late August, Biden announced up to $20,000 in loan relief for Pell Grant recipients making under $125,000 a year, and up to $10,000 in relief for other federal borrowers under the same income cap. Debt cancellation is not subject to federal taxes thanks to a provision in the American Rescue Plan. It ensured that from 2021 to 2025, forgiven student loans won't be included as part of gross income. But state policies are a bit more complicated and could impose taxes on the loan forgiveness on their own.

The Tax Foundation — a nonpartisan think tank — released an updated list on the states that could tax Biden's student-loan forgiveness. The report explained that while many states might choose to follow the provision in the American Rescue Plan, not every states does, leaving their residents potentially subject to having taxes docked from the relief.

"This is an evolving issue because some state laws are expansive enough to provide administrative authority to exclude student loan debt discharge if so desired, or for state officials to announce that they believe they have the authority to do so under provisions of existing law, particularly those pertaining to the discharge of student debt in narrower existing circumstances," the report said.

Here are the six states that could tax student-loan forgiveness:

1. Arkansas: The state's tax code does not have any details surrounding the treatment of student-loan forgiveness.
2. Minnesota: The state's tax code does not have a provision excluding student-loan forgiveness from income.
3. Mississippi: The state relies on the precedent of taxing discharged debt and confirmed Biden's relief is taxable.
4. Wisconsin: The state's current tax code is in-line to tax loan forgiveness.
5. North Carolina: The state confirmed in a press release that student-loan forgiveness is taxable.
6. Indiana: The state's revenue department confirmed to Insider it will tax student-loan forgiveness as income.

There's still time for the states to clarify their positions on whether the student-loan forgiveness is taxable. For now, federal borrowers can wait to hear from the Education Department on the next steps to access the relief, which will likely be an online form to apply for loan forgiveness that should become available in early October.