Massachusetts · Student Loan Forgiveness Tax Exclusion
Student Loan Forgiveness Tax Exclusion in Massachusetts (2026)
Student loan forgiveness discharged through 2025 is excluded from taxable income under the American Rescue Plan Act provision. Massachusetts has a progressive income tax with a top rate of 9%, so a Massachusetts filer's combined marginal rate on the next dollar at $96,505 of income is about 27% (22% federal + 5% MA).
2026 savings example for Massachusetts
Planning estimate for a single filer earning $96,505 (Massachusetts 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; MA tax uses the state brackets in LevyIO's dataset and assumes the state follows the federal treatment.
Estimated total savings
$1,350
Federal savings
$1,100
$12,401 → $11,301 · 22% bracket
MA state savings
$250
$4,825 → $4,575 · 5% marginal
Combined marginal rate
27%
≈ $270 saved per $1,000 deducted
Federal × Massachusetts marginal rates (2026, single)
Gross-income ranges include the federal standard deduction. The MA 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) | MA marginal | Combined | Per $1,000 |
|---|---|---|---|---|
| 10% | $16,100 - $28,500 | 5% | 15% | $150 |
| 12% | $28,500 - $66,500 | 5% | 17% | $170 |
| 22% | $66,500 - $121,800 | 5% | 27% | $270 |
| 24% | $121,800 - $217,875 | 5% | 29% | $290 |
| 32% | $217,875 - $272,325 | 5% | 37% | $370 |
| 35% | $272,325 - $656,700 | 5% | 40% | $400 |
| 37% | Over $656,700 | 5% | 42% | $420 |
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
Massachusetts filing notes
Apply the Massachusetts personal exemption before the 5% ordinary-rate estimate, and plan for the 4% surtax if taxable income approaches $1,107,750 in 2026. Do not assume all income is taxed at 9%; only the amount above the surtax threshold gets the extra 4%. The low $2M estate tax exemption affects more families.
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 Massachusetts taxpayer in 2026?
In LevyIO's example, a single filer with $96,505 of income (the Massachusetts 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 $250 in Massachusetts tax (5% state marginal rate), roughly $1,350 combined. It is a planning estimate computed from the 2026 IRS brackets and LevyIO's MA bracket data, not a survey figure.
What is the Massachusetts income tax rate for 2026?
Massachusetts has a progressive income tax with a top rate of 9%. The MA standard deduction in LevyIO's dataset is $0 single / $0 married. Flat 5% ordinary rate after personal exemptions, plus 4% surtax above $1,107,750 in 2026. 8.5% on short-term gains. Estate tax ($2M exemption).
Who qualifies for the Student Loan Forgiveness Tax Exclusion in Massachusetts?
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. Massachusetts filers should confirm on the MA 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. Massachusetts: check the Massachusetts Department of Revenue 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 Rhode Island
- Student Loan Forgiveness Tax Exclusion in Alabama
- Student Loan Forgiveness Tax Exclusion in California
- Student Loan Forgiveness Tax Exclusion in Delaware
- Student Loan Forgiveness Tax Exclusion in Illinois
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.