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Student loan borrowers and small business owners to see tax breaks in new bill

The roof of the Minnesota State Capitol building, where the MN house voted to conform the state tax code to the federal tax code (Elijah Todd-Walden/BLCK press)

The MN House of Representatives passed a bill Monday that would change tax season for millions of Minnesotans.

The bill HF 31 frees businesses that took out PPP loans from paying taxes on those loans. If the U.S. Supreme Court rules in favor of President Joe Biden’s proposed student loan forgiveness plan, student loan borrowers will also be able to avoid paying taxes on their loans. In total, Minnesotans could see over $100 million in tax cuts.

“As the incoming Taxes Chair, this was a clear priority for our caucus. I am incredibly proud that our team was able to put this together and get it out the door in the second week of session,” said Rep. Aisha Gomez (DFL - Minneapolis,) Chair of the Taxes Committee. “I hope to continue this momentum as we work to create a fair and equitable tax system which allows us to build a Minnesota which works for everyone.”

The bill is now heading to the Senate after a unanimous vote passed it in the House. Officials in the state Revenue Department say that the bill must be passed by Jan 13 in order to allow tax preparers enough time to adjust to the new law in advance of tax season.

When Biden’s student loan forgiveness plan was first announced, Minnesota tax code would have still required people to pay taxes on student loans, despite their being forgiven. This bill changes that, and borrowers will not owe state taxes on forgiven loans.

The Senate had the first and second reading of the bill Tuesday, and is expected to vote on it on Wednesday.

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