federal educational loan repayment as an income tax write off (after graduation)

[MedicationWorks]

Hi everyone.. I'm going to have about 150k in federal educational loans when I graduated , and I was wondering if I could use any of that towards an income tax write off when I finally start working.

Does anyone know how much I could write off each year towards federal educational loan repayment? (it's essentially free money towards my educational debt). I'm guess not much, but it would be nice to know some specifics.

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[mpp]

Not really. You can deduct up to $2500 in interest on educational loans each year. This deduction phases out for incomes between $50,000 and $65,000 adjusted gross income.

Another option is to find a job in which the practice will buy out your loan, i.e., the loan becomes a loan to the practice for which this payment will likely qualify as a business expense.

 

[MedicationWorks]

Originally posted by mpp
practice will buy out your loan, i.e., the loan becomes a loan to the practice for which this payment will likely qualify as a business expense.

Thanks that's an interesting work-around. I haven't thought of that before (having a business/practice claim it as a tax deductable expense).

 

[edmadison]

Of course if the loan is paid off for you, you will have to pay income tax on that loan forgiveness. Of course this beats paying of the loan itself.

Ed

 

[sleepydoc]

What about if the group gives you a loan for the same amount you owe, and you pay off your medical school loans with that money.

Now that money wasn't income-- it was another loan -- and you wouldn't have to pay taxes on it. You then pay off the loan to the group with the interest being deducted as a business expense.

Does that work?

 

[Caverject]

Originally posted by sleepydoc
What about if the group gives you a loan for the same amount you owe, and you pay off your medical school loans with that money.

Now that money wasn't income-- it was another loan -- and you wouldn't have to pay taxes on it. You then pay off the loan to the group with the interest being deducted as a business expense.

Does that work?

Sounds confusing, but intriging 😕

 

[edmadison]

Originally posted by sleepydoc
What about if the group gives you a loan for the same amount you owe, and you pay off your medical school loans with that money.

Now that money wasn't income-- it was another loan -- and you wouldn't have to pay taxes on it. You then pay off the loan to the group with the interest being deducted as a business expense.

Does that work?

So the reason behind this new loan is to avoid the phase out on the educational interest deducation? I see several problems. I would never lend money in that context. Student loans are not discharged in bankruptcy whereas this type of loan would be. You (or your employer) could get burned by making such an arangement.
If you are given a personal loan to repay your student loans, it would be hard to argue that you can deduct it as a business expense since primary education is not deductable. There IRS would be unlikely to allow you to do this (if they figured it out).

Ed