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Here’s how to calculate your bill for student loan forgiveness, if you live in one of the 7 states that may tax it. KEY POINTS It’s possible that seven states — Arkansas, California, Indiana, Minnesota, Mississippi, North Carolina and Wisconsin — may tax student loan forgiveness. If you’re living in a state that may tax relief, you should “be prepared” and try to set the money aside, experts say. If you’re expecting relief from President Joe Biden’s plan to forgive up to $20,000 in student loans, you may have state income tax liability, depending on where you live. While legislation is evolving, it’s possible that seven states — Arkansas, California, Indiana, Minnesota, Mississippi, North Carolina and Wisconsin — may tax student loan forgiveness, according to a Tax Foundation analysis. It depends on state conformity with federal laws, including the provision from the American Rescue Plan of 2021 that makes student loan forgiveness federally tax-free through 2025. How to estimate your state tax liability In a flat-tax state, you can multiply the forgiven loan amount by the state’s income tax rate for a quick estimate, Harris said. But it’s trickier in states with graduated rates, he said.