Tuition Forgiveness Tax
- 0Dec 21, '12 by Kimba100Hi everyone!Just curious if anyone else has gone through this but I have a loan forgiveness through my school for Upmc Shadyside that their school costed $32,054 for two years and I only had to pay $10,000 and $18,923 was forgiven as long as I work my two years at upmc as a full time nurse. When I started work, every two weeks, $131 is taken out of my pay check until two years or $6,812 of taxes have been paid.......Will I see this money back ever??? Or did I really just pay almost 17,000 and make myself committed to UPMC for two years??
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- 0Dec 21, '12 by llg GuideYou'll have to talk with the official people who run the program at your hospital ... but it is VERY possible that you do taxes on the amount of your school expenses being paid by your employer. The general rule is that any compensation you receive from your employer is considered "taxable income" unless it meets a very narrow set of requirements. That usually includes educational loan payback programs.
They are paying you almost $15,000 in the form of the a school loan. That $15,000 is "extra compensation" for the work you do over the next 2 years -- and the government wants the taxes from that income.
Assuming that it is going to be considered as taxable income by the government, you might want to talk with a tax accountant to see if you can reduce your tax obligation by doing something like income averaging to spread that "income" out over a few more years. Depending on your income history and near future, you might be able to reduce the tax burden a bit.Last edit by llg on Dec 21, '12
- 0Feb 14, '13 by BeansMamaWhen upmc pays that portion of school it is considered income to you, that is why you have to pay taxes on it. They tax the money out while you work over the next two years so that you aren't bombarded with it after your contract is up. You didn't get screwed its just taxes.
- 0Mar 13, '13 by PghRN30Think of it this way (also a UPMC school grad) .....that money is yours....it is still 100% yours. They are just forcing you to have a savings plan.
When you hit 2 years, your pay check that pay period will have that almost $19,000 on ONE PAY CHECK as income (that you were already paid, but is written off on that pay as TAXABLE income). The goverment will want their chunk of that....and it would KILL your finaces to owe that all at once. In that same pay check, UPMC will also release that money they have been putting asside for you out of your pays. So your pay check will cover the tax due on that. It was estemated of what they expect we will need to cover the taxes, and hopefully will be a little over....anything over what you need for taxes will be on your pay if its a little under we may have to pay a little more into taxes.
Also, this way makes it only taxed once when we are paid out in 2 years. If you set up a savings account yourself you would be paying tax on the money you are putting into savings, and then in 2 years when you went to file taxes that year, you would owe all the taxes, and be writting a check to pay the IRS with money you already were taxed on.