When any type of loan is forgiven, the amount forgiven is called cancellation of debt (COD) and is taxable, unless specifically exempt. As part of the American Rescue Plan of 2021, 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. Loans that are forgiven under The Student Loan Relief Act signed by President Biden on August 24, 2022 qualify for COD tax relief under Section 108(f)(5).
There are 13 states that currently tax COD of student loans. California is not one of them!