Hello all. I have a question about student loan reimbursement. I have signed a deal with a hospital that entails both a stipend and student loan repayment. However, they do not pay my loans back directly. They reimburse me. I know I have to pay taxes on the stipend...but do I have to pay taxes on the student loan reimbursement? And how do I separate the two on my tax forms? They were both listed combined on a 1099-MISC in box 7 nonemployee compensation. ANY help would be much appreciated. Thanks again!

Zip Code: 26508

That's a tough one.

First off, I don't think your stipend belongs in Box 7. Instead, if you are receiving an allowance from the hospital or from a grant so you can pay your bills while you're doing your research, that generally isn't viewed as non-employee compensation. Instead, it is reflected in Box 3, as Other Income, and it is not subject to the additional tax paid by self-employed individuals.

This additional tax is known as the Self-employment tax, and is assessed at a rate of 15.3%. When you work as an employee, your employer withholds social security and Medicare taxes at 7.65%, and then matches the taxes withheld from your pay. So the government gets 15.3 cents for every dollar you earn.

When you're compensated as an independent contractor (as reflected in Box 7 of the 1099-Misc), the government still wants their 15.3 cents for each dollar of income you earn. You'll report and pay this tax as part of your federal tax return - in addition to any federal and state income taxes you'll owe.

So if your only income from the hospital is the stipend and the loan repayment, and the only work you're doing at the hospital is research, you could argue that all of your income belongs in box 3 of the 1099-Misc, and none of your income is subject to the 15.3% self-employment tax.

I hope this helps you out.

Zip Code: 01801