Welcome to the MDTAXES Message Board

The MDTAXES Network is an affiliation of CPAs that specialize in the tax planning and preparation for young health care professionals.  Please leave your questions or comments for our CPAs, who visit the message board regularly, or review the answers, suggestions and ideas posted in response to your colleagues' questions.

Please check out our other Message Boards available at www.FindAGoodCPA.com.

Please note: We are NOT affiliated with the Maryland Tax Department. If you're looking for information about Maryland income taxes, go to www.marylandtaxes.com.

Original MDTAXES Forum
Start a New Topic 
Author
Comment
STUDENT LOANS

I HAVE A CLIENT WHO HAS A MEDICAL P.C. SHE WILL BE RECEIVING A LUMP SUM OF $80,000, WHICH SHE WANTS TO USE TO REPAY PART OF HER $125,000 STUDENT LOANS. THE $80,000 WILL BE DEPOSITED AS INCOME.BUT CAN THE $80,000 BE DEDUCTED AS EDUCATIONAL EXPENSE, ETC.? I DON'T THINK SHE WILL BE ABLE TO DEDUCT. MY SUGGESTION WAS FOR HER TO TAKE OUT A HOME EQUITY LOAN TO REPAY THE STUDENT LOANS.THEN, SHE COULD USE THE $80,000 FOR ORDINARY BUSINESS EXPENSES WHICH ARE DEDUCTIBLE.SHE CLAIMS THAT SOME OF HER ASSOCIATES DEDUCT THE REPAYMENT OF STUDENT LOANS ON THEIR CORPORATE RETURNS.
PLEASE ADVISE.

THANK YOU!

Zip Code: NJFTAXPRO@AOL.COM

Re: STUDENT LOANS

My understanding is that the corporation can deduct payments of student loans made on behalf of an employee, but the employee would have to pick up that amount as income on their W-2 form. The payment of the loans is another form of compensation for services provided by an employee.

Perhaps the corporation can make a loan to the employee which is forgiven over time. So instead of reporting the income all in one year, the employee will report income as the loan is forgiven. You need to be careful that this strategy doesn't cause the corporation to get stuck with taxable income, however.

Zip Code: cpa@mdtaxes.com