Can a Corporation Pay Student Loans & Count It As a Business Expense?
If your company relies on high-quality professional employees, offering to pay student loans can be part of your recruitment strategy. These incentives typically require the employee to work at your company for a specific number of years. You can write these payments off as a legitimate business expense of your company, but the employee must report the payments as part of his income.
When reporting the student loan payment for tax purposes, your company must include the amount as part of the employee's salaries and wages on his W-2 form. When you file your tax return, the amount can either be included as part of the salaries and wages you pay, or as part of employee benefits you provide, depending on how you organize your accounting.
Any employee who gets his student loan paid off by his employer must claim the payment as income on his tax return. The Internal Revenue Service considers this to be part of your pay, similar to a bonus, so it must be reported as regular income. However, the employee can claim a personal deduction for any portion of interest that was due on the student loans.
Employers also can create an educational assistance program to pay an employee's current college tuition. In this case, as long as the tuition assistance is available to all employees, the employee does not have to pay income taxes on the first $5,250 in assistance from the employer. This program cannot apply to past tuition debts such as student loans.
If you are considering having your corporation pay off your own student loan in an attempt to create a business write-off, keep in mind that any tax benefits to your corporation will be offset when you report the income on your personal tax return. Also make sure any other stockholders approve of such a move before proceeding.