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Business Loan to pay off student loans (tax advantage)

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  • Business Loan to pay off student loans (tax advantage)

    I'm in my first year of practice out of residency. Unfortunately, I have a massive student loan burden of $488,000 thanks to the ridiculous cost of medical school tuition these days and the high rates of student loan interest. I have refinanced my loans with SoFi and thankfully consolidated to a much lower interest rate. I'm currently paying almost $6,000 monthly to SoFi in a 7 year repayment plan.

    I have heard colleagues mention a strategy for paying off student loans that may save me a ton of money in taxes. This involves securing a loan for your business (I have an LLC that I get paid from my job in the form of 1099 income). If this occurs, then the interest on the business loan is tax deductible (to a greater extent than the $2,500 limit from student loan interest).

    Has anyone heard of this strategy? Is anyone knowledgeable enough in taxes (and tax law!) to know if this is accurate and could potentially help me?

    Thanks

  • #2


    I have heard colleagues mention a strategy for paying off student loans that may save me a ton of money in taxes. This involves securing a loan for your business (I have an LLC that I get paid from my job in the form of 1099 income). If this occurs, then the interest on the business loan is tax deductible (to a greater extent than the $2,500 limit from student loan interest). Has anyone heard of this strategy? Is anyone knowledgeable enough in taxes (and tax law!) to know if this is accurate and could potentially help me?
    Click to expand...


    It could benefit if you have a legitimate business but what bank will loan you a half million with no collateral? Your only asset at this point is you.
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      I understand the reasoning, I just agree with the above who the heck would give this too you at a rate good enough to make it worthwhile even tax adjusted. If it does work, please post the details so I may consider it. When I was looking at business loans for docs, etc....the rates were at least 3x higher than SoFi, so not very good, and terms werent as flexible either. If thats changed I'd be interested.

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      • #4
        Sounds the same as refinancing a mortgage to pay off high interest rate loans.  With the rate reduction and tax benefits, it can be really helpful to do.  I did that with a few of my highest interest rate student loans awhile back.  Makes a lot of sense to go from 7.25% interest down to an effective rate of around 2.5% (after tax deduction is factored in).  I had tons of equity in my house so it was an easy way to refinance the high interest debt quickly.

        As long as you save/invest the extra cash flow, I see no reason not to.

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        • #5
          If you find a bank to lend you that kind of money even at 6% as a business loan...please kindly email me. I will pay you a $1000 referal fee My promise.

          That being said

          I use that tax deduction strategy to maximize returns after leverage in my investments.

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