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  • Pre-tax contributions??

    As part of the corona relief package there was a part of the bill that stated employers could contribute up to $5250 pre-tax to employees student loans. My questions is if I, as a 1099 IC, could also put away that money as well?

    In the ideal scenario all docs would band together to get congress to allow anyone to contribute a much a larger sum of their pre-tax dollars to student loan payments, but I'll continue to dream.

  • #2
    Nope.

    26 U.S. Code § 127 - Educational assistance program, (b), (3) Principal shareholders or owners

    Not more than 5 percent of the amounts paid or incurred by the employer for educational assistance during the year may be provided for the class of individuals who are shareholders or owners (or their spouses or dependents), each of whom (on any day of the year) owns more than 5 percent of the stock or of the capital or profits interest in the employer.

    With the exception of employer retirement plans. Business owners generally can not receive pre-tax benefits. Pre-tax benefits are a public policy for employees, not their owners.

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    • #3
      Terrible. Government wants to keep us all poor. US becoming exactly what the founders were trying to evade in the first place.

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      • #4
        Originally posted by NewRad123 View Post
        Terrible. Government wants to keep us all poor. US becoming exactly what the founders were trying to evade in the first place.
        I am sorry, but will have to say that I think the code is correct on this one (actually on most policies).

        Perhaps you can imagine the finagling that would go on with "personal benefits" if there were not some kind of separation between "employer" providing benefits and "employee" receiving benefits. Left hand literally passing to right hand. I totally understand looking for tax breaks but we need some sort of division of powers to ensure people aren't setting up and using businesses merely for the tax breaks. It already goes on way too much than I am comfortable with.
        Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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        • #5
          Originally posted by NewRad123 View Post
          Terrible. Government wants to keep us all poor. US becoming exactly what the founders were trying to evade in the first place.
          The tax code is quite favorable to business owners, so this is one of the sillier comments I've read here.

          Heck, a huge portion of the FIRE community like this one is devoted to becoming a business owner and utilizing the tools available only to them.

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          • #6
            Originally posted by NewRad123 View Post
            Terrible. Government wants to keep us all poor. US becoming exactly what the founders were trying to evade in the first place.
            I understand your disappointment. Not sure founders actually considered taxes. They weren’t around in 1913 for 16th amendment. I am more upset with non profits used by special interests. The vast majority provide zero benefits for me. What’s with that?

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            • #7
              For large companies/corporations, agree with what you said, but that's not what I'm talking about. I'm simply referring to how the cost of medical school is hundreds of thousands of dollars, and then when doctors start making money the government takes around half our paycheck and will still owe half of what's left in student loans. That is what's criminal.

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              • #8
                Originally posted by NewRad123 View Post
                For large companies/corporations, agree with what you said, but that's not what I'm talking about. I'm simply referring to how the cost of medical school is hundreds of thousands of dollars, and then when doctors start making money the government takes around half our paycheck and will still owe half of what's left in student loans. That is what's criminal.
                Honestly, doctors make this decision with their eyes open. Sure, it's expensive to go to medical school and taxes are high for all high earners but, if the income potential was not there, I believe fewer people would go to medical school, passion or not, because they would not have the potential to be compensated for the agony of the long training period combined with the expense of doing so. It's tough, far more sacrifice than I would have been willing to make, and I empathize that you are awakening to the cold, cruel world of taxes. It's like an ice bath, I get it. You won't be in this particular financial struggle forever, though it seems like it right now. Learn the ropes and get a good CPA to help you save wherever possible and to help prepare you for the inevitable. Good luck.
                Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                • #9
                  Originally posted by NewRad123 View Post
                  I'm simply referring to how the cost of medical school is hundreds of thousands of dollars, and then when doctors start making money the government takes around half our paycheck and will still owe half of what's left in student loans. That is what's criminal.
                  interesting to only blame the government for the problem. Yes they have a hand in the cookie jar but they aren't the only ones. The first part you wrote, "the cost of medical school is hundreds of thousands of dollars" is not the fault of the government. Blame the medical schools. Blame the people who are willing to go to these medical schools and pay that much money. Supply/demand issue. The origin of the problem isn't the government, it's the medical schools and the people willing to go. Government via taxes certainly aren't helpful after medical school but they didn't put these people in the position in the first place

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                  • #10
                    I think the best tax changes would allow all incomes to be able to deduct student loan interest. Would've helped at least a little once we were out of the training period.

                    It sucks sometimes, it really does. But as mentioned above, we all went into this knowing what we were getting ourselves into. Pay down the debt, and all of a sudden it will feel like you have a lot more money at your fingertips. But the debt isn't going to go away on its own, and I would agree that I think this law is not the worst out there.

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                    • #11
                      Originally posted by NewRad123 View Post
                      For large companies/corporations, agree with what you said, but that's not what I'm talking about. I'm simply referring to how the cost of medical school is hundreds of thousands of dollars, and then when doctors start making money the government takes around half our paycheck and will still owe half of what's left in student loans. That is what's criminal.
                      You're not going get much sympathy from the general public. It's criminal when all the players (colleges, government, etc.) let people take out hundreds of thousands of dollars for useless degrees. Physicians typically won't get much sympathy for anything. Sure, we got some sympathy at the beginning of the pandemic but now look at what is happening with regards to how healthcare workers are viewed by some.

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                      • #12
                        Originally posted by JBME View Post

                        interesting to only blame the government for the problem. Yes they have a hand in the cookie jar but they aren't the only ones. The first part you wrote, "the cost of medical school is hundreds of thousands of dollars" is not the fault of the government. Blame the medical schools. Blame the people who are willing to go to these medical schools and pay that much money. Supply/demand issue. The origin of the problem isn't the government, it's the medical schools and the people willing to go. Government via taxes certainly aren't helpful after medical school but they didn't put these people in the position in the first place
                        You have this one backwards, my friend. If the government weren’t standing behind every would-be doctor with a blank check you wouldn’t have the perverse incentive to raise tuition to ludicrous levels. Ditto for undergrad. The IBR plans and PSLF create further impetus to borrow more recklessly. Yes, plenty of blame deserves to go around, but the primary driver setting up bad incentives is none other than our government. Ditto for healthcare costs.

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                        • #13
                          “The most terrifying words in the English language are: I'm from the government and I'm here to help.”

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