State Rep. Mark Huizenga and the Michigan House of Representatives today approved a plan to protect disabled veterans from owing state income taxes for student loans canceled by the federal government.

“We are deeply indebted to the men and women who have served in our nation’s military, and our debt is even greater to veterans wounded during their service,” said Huizenga, of Walker. “This plan will allow disabled veterans to receive the full benefit of federal student loan cancellation without owing income tax to the state of Michigan.”

A federal program provides for the discharge of certain student loans for totally and permanently disabled veterans. The program is currently exempt from federal income tax. Because federal tax returns are used to complete state returns, the canceled loans are also not reported as income for state taxes.

The federal tax exemption for the program is scheduled to expire in 2025. To ensure disabled veterans can continue to claim the state-level exemption, Senate Bill 25 would allow totally and permanently disabled veterans to continue deducting loans discharged through the federal program from state income taxes, regardless of whether the federal exemption is extended.

Additionally, some veterans previously paid state income taxes on their discharged loans before the federal exemption was established. The plan would also apply the state deduction retroactively to tax years 2016-2019.

SB 25 now proceeds to the governor for her consideration.