California · Student Loan Forgiveness Tax Exclusion
Student Loan Forgiveness Tax Exclusion in California (2026)
Student loan forgiveness discharged through 2025 is excluded from taxable income under the American Rescue Plan Act provision. California has a progressive income tax with a top rate of 13.3%, so a California filer's combined marginal rate on the next dollar at $91,905 of income is about 31.3% (22% federal + 9.3% CA).
2026 savings example for California
Planning estimate for a single filer earning $91,905 (California median household income in LevyIO's state dataset) who removes $5,000 from taxable income. Federal tax uses the 2026 IRS brackets after the $16,100 standard deduction; CA tax uses the state brackets in LevyIO's dataset and assumes the state follows the federal treatment.
Estimated total savings
$1,565
Federal savings
$1,100
$11,389 → $10,289 · 22% bracket
CA state savings
$465
$4,455 → $3,990 · 9.3% marginal
Combined marginal rate
31.3%
≈ $313 saved per $1,000 deducted
Federal × California marginal rates (2026, single)
Gross-income ranges include the federal standard deduction. The CA column is the state marginal rate at the midpoint of each range. The last column is the tax saved per $1,000 deducted at that combined rate.
| Federal bracket | Gross income (single) | CA marginal | Combined | Per $1,000 |
|---|---|---|---|---|
| 10% | $16,100 - $28,500 | 2% | 12% | $120 |
| 12% | $28,500 - $66,500 | 6% | 18% | $180 |
| 22% | $66,500 - $121,800 | 9.3% | 31.3% | $313 |
| 24% | $121,800 - $217,875 | 9.3% | 33.3% | $333 |
| 32% | $217,875 - $272,325 | 9.3% | 41.3% | $413 |
| 35% | $272,325 - $656,700 | 11.3% | 46.3% | $463 |
| 37% | Over $656,700 | 11.3% | 48.3% | $483 |
Eligibility & forms
Borrowers with student loans forgiven through 2025
- Loan forgiveness through 12/31/2025 is tax-free
- Applies to federal and private student loan forgiveness
- Includes income-driven repayment plan forgiveness
Federal forms: Form 1099-C, Form 1040
California filing notes
Maximize tax-deferred contributions. Plan for the additional 1% surcharge over $1M. If leaving California, document your move thoroughly. The FTB aggressively audits departing high-income residents.
Common mistakes: Not knowing forgiveness may be taxable after 2025; Confusing PSLF (always tax-free) with other programs; Not planning for potential state tax on forgiveness.
Frequently asked questions
How much can the Student Loan Forgiveness Tax Exclusion save a California taxpayer in 2026?
In LevyIO's example, a single filer with $91,905 of income (the California median household income in our state dataset) who removes $5,000 from taxable income saves about $1,100 in 2026 federal tax (22% marginal bracket) plus about $465 in California tax (9.3% state marginal rate), roughly $1,565 combined. It is a planning estimate computed from the 2026 IRS brackets and LevyIO's CA bracket data, not a survey figure.
What is the California income tax rate for 2026?
California has a progressive income tax with a top rate of 13.3%. The CA standard deduction in LevyIO's dataset is $5,706 single / $11,412 married. Highest state income tax (13.3%). Additional 1% Mental Health Services Tax over $1M. No preferential capital gains rate.
Who qualifies for the Student Loan Forgiveness Tax Exclusion in California?
Borrowers with student loans forgiven through 2025. The federal rules are the same in every state; the requirements are: Loan forgiveness through 12/31/2025 is tax-free; Applies to federal and private student loan forgiveness; Includes income-driven repayment plan forgiveness. California filers should confirm on the CA return whether the state follows the federal treatment.
Which forms do I file to claim the Student Loan Forgiveness Tax Exclusion?
Federal: Form 1099-C, Form 1040. California: check the California Franchise Tax Board instructions for the matching state schedule. Common mistakes: Not knowing forgiveness may be taxable after 2025; Confusing PSLF (always tax-free) with other programs; Not planning for potential state tax on forgiveness.
Student Loan Forgiveness Tax Exclusion in other states
- Full Student Loan Forgiveness Tax Exclusion guide (all states)
- Student Loan Forgiveness Tax Exclusion in Alabama
- Student Loan Forgiveness Tax Exclusion in Delaware
- Student Loan Forgiveness Tax Exclusion in Illinois
- Student Loan Forgiveness Tax Exclusion in Massachusetts
- Student Loan Forgiveness Tax Exclusion in Mississippi
Sources
Reviewed 2026-09-17. Estimates are educational planning figures computed from the IRS 2026 inflation adjustments and LevyIO's state bracket dataset; they are not tax advice.