When I wrote in this space last week, I did not plan to have this article serve as a follow-up. But then stories came up that not only expanded but also drove home some of the points I was making – resulting in this sequel.
In that piece last week, I wrote about how it is easy to take headlines (such as emerged after the recent passage of the Inflation Reduction Act) and think tax implications are understood, even though big measures may still see tweaks for months after passage when it comes to implementation. Now this week, I want to point out how those headlines often may not give you the whole story, as well, for they tend to focus on the federal implications, when you also must file a state tax return.
This came into focus in a couple articles I saw concerning the recent announcement of President Biden’s student loan relief plan. For many taxpayers this could include a clean $10,000 reduction in their student loan debt balance. But then there was word that that money, although not taxable on the federal level, could be subject to state tax in as many as 13 states (see here complete with scare-tactic headline warning of an $1,100 bill), but then that was cut down to four (see here), and that of course could still change if those states choose to place this relief outside the normal rules.
And sure this news is progressing in a direction where fewer people have to worry about an increased tax bill, so I am not saying this is some huge story that should be being trumpeted more, but it does display both the levels that one story can have and how they can change.
Then last week I also saw this story that spoke of the Child Tax Credit, something that got a lot of attention last year when people were receiving some of the money for the expanded credit directly for six months. The minutiae of what is in this story isn’t worth going into here, but it does list some states that have implemented some child tax credit relief on their end. So even though the expanded credit has not been extended on the federal level, it’s easily possible that you could live in one of these states and be unaware of the overall situation.
As I close this, I have no grand question or advice to leave. But I do hope these pieces can help to highlight how complicated tax measures can be and how one can’t expect to have all definite answers all at once.
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