Typically, federal student loan debt forgiven under certain programs—like income-driven repayment (IDR) plans—counts as taxable income, meaning borrowers who get relief will likely have a heftier tax bill. (Relief stemming from Public Service Loan Forgiveness, or PSLF, and some other programs is never considered taxable.)

That has temporarily changed thanks to the COVID-era American Rescue Plan. That law stipulated any federal student loan debt canceled between 2021 and the end of 2025 would not be counted toward federal taxable income.

Those savings could be significant, particularly for anyone worried about a student loan forgiveness “tax bomb.” In a simplified example, let’s say a borrower earned the median U.S. household income of around $75,000, and had $20,000 in loans forgiven. Under normal circumstances, the borrower’s new taxable income would be around $95,000. Since the full $20,000 falls in the 22% tax bracket for an individual, that’s a $4,400 bill. (Of course, how much you would actually owe depends on numerous factors, including deductions, credits, other income, and so on.)

That said, states have their own laws and regulations on taxing forgiven debt, and most are following the federal government’s lead. But there are five that are imposing tax on the forgiven debt at this time, according to the Tax Foundation: Arkansas, Indiana, Mississippi, North Carolina, and Wisconsin.

That means if you received student loan forgiveness last year and live in one of those five states, the relief will count as taxable income when you file your 2023 return. Exactly how much you will pay depends on which tax bracket you fall into, your state, and the amount of your loans.

All of that said, it might make sense to speak with a tax professional if you benefited from forgiveness. The laws surrounding taxation are fluid and have changed significantly over the past few years, and could continue to evolve. Typically, borrowers who receive forgiveness get a 1099-C tax form to report to the IRS.

The state of student loan forgiveness

Since he became president, Biden’s Education Department has forgiven $138 billion in student loans for 3.9 million borrowers, according to the most recent data. That’s through a combination of established forgiveness programs, like IDR and PSLF, and discharging debt for those with disabilities and for those who were defrauded by their institutions of higher learning.

Biden has also introduced a new IDR plan, the most generous to date, and made improvements to the PSLF program. That IDR program, called SAVE, has 7.5 million enrollees, with 4.3 million paying $0 per month toward their loans, according to the Education Department.

More relief could be on the way. Though Biden’s initial forgiveness plan was quashed by the Supreme Court, the administration is currently in the midst of writing proposed regulations to make more borrowers eligible for forgiveness.