Tax Byte

California Governor Gavin Newsom has signed a retroactive tax relief bill for current and former students impacted by economic hardships during the COVID-19 pandemic. A.B. 111, signed by Newsom on May 15, makes certain student loan debt relief and other pandemic relief provided to students through postsecondary education institutions tax free at the state level.

Specifically, the temporary provisions will:

• exclude from an individual’s gross income student loan discharges for taxable years beginning on or after January 1, 2021, and before January 1, 2026, in conformity with the federal exclusion under the American Rescue Plan Act;
• exclude from an individual’s gross income, for taxable years beginning on or after January 1, 2022, and before January 1, 2027, any amount relating to the discharge of unpaid community college fees due or owed by a student; and
• exclude from an individual’s gross income for taxable years beginning on or after January 1, 2020, and before January 1, 2028, specified higher education emergency grants received by a student in postsecondary education for expenses and financial needs related to the COVID-19 pandemic, as authorized under federal law.

The temporary exclusions are effective immediately. Stay tuned for additional practitioner insights on the measure from Western CPE’s expert instructors.