An Act excluding student loan forgiveness from taxable income for permanently and totally disabled veterans

194th Legislature (2025-2026) Introduced by Rich Haggerty

Massachusetts would exclude from gross income the disability-related student loan forgiveness for permanently and totally disabled veterans, reducing their state tax liability.

Accompanied a study order, see H5237

Comprehensive Summary: H 3116 — An Act excluding student loan forgiveness from taxable income for permanently and totally disabled veterans

Overview

H 3116, introduced February 27, 2025, seeks to exclude from Massachusetts gross income any amount of student loan forgiveness received by a veteran who is permanently and totally disabled, where such forgiveness would otherwise be includible in income for the taxable year. The bill is a revenue measure and targets the treatment of federal student loan discharge for disabled veterans at the state level.

Purpose and intent

Align Massachusetts tax treatment with the specific federal circumstance of loan discharge due to disability.

Provide targeted tax relief to permanently and totally disabled veterans by excluding qualifying loan forgiveness from state taxable income.

Key provisions

Legislative change to Chapter 62 of the General Laws (Massachusetts), §2(a)(2).

Adds a new subparagraph (R) to explicitly exclude from gross income:

Any amount received by a veteran who is permanently and totally disabled
That would be includible in gross income for the taxable year due to the discharge of an educational loan under 26 U.S.C. §108(f)(5)(A)(iii) (federal rule for discharge of a student loan due to total disability).

Scope: Applies to the amount of loan forgiveness that would otherwise be taxable income in the veteran’s Massachusetts tax return for the applicable year.

Who is affected

Massachusetts veterans who are permanently and totally disabled.

Recipients of federal student loan forgiveness triggered by disability (as defined in the cited federal code). These individuals would see the forgiven amount excluded from their Massachusetts gross income for the relevant taxable year.

Procedural and timeline aspects

Introduced: February 27, 2025.

Referred to the Committee on Revenue (same date as introduction).

Senate concurrence recorded on February 27, 2025.

Related House bill: HD 3672 (the docket shows HD 3672 as the replacing or related version).

Hearing scheduled: June 24, 2025, from 10:30 AM to 1:00 PM, in room A-2.

Status: Pending committee action and further legislative steps; no enacted date as of the provided information.

Fiscal and policy considerations

The bill would reduce Massachusetts taxable income for qualifying individuals, potentially reducing state revenue by the amount that would have been taxed on forgiven loans.

By targeting a specific beneficiary group (permanently disabled veterans), the measure provides targeted relief and may reflect policy goals related to veterans’ benefits and disability considerations.

No explicit implementation date or transition period is stated in the summary; standard operative date would follow enacted legislation.

Summary note

H 3116 offers a targeted tax exemption in Massachusetts for the portion of student loan forgiveness related to disability discharges, eliminating state taxation on that forgiveness for permanently and totally disabled veterans. The bill is currently undergoing committee review, with a scheduled public hearing on June 24, 2025.