It depends. I've seen loan repayment programs that report the income in such a way that the person is subject to social security and Medicare taxes. And I've seen other programs, such as the NIH Loan Repayment Program, that definitely aren't subject to these taxes.

I would recommend that you start by asking your employer how they are going to report this income to you. The IRS will determine whether you'll owe social security and Medicare taxes on this income based on how the income is reported on the 1099 issued to you.

You should also keep in mind that if your total wages will exceed $97,500 this year (in 2007), you'll be over the FICA Max, so you would only owe Medicare taxes on this income at a rate of 2.9%.

Let us know if you find out any additional info about this specific loan repayment program, so we can get you a better answer to this question.

Zip Code: 01801