Student Debt! Can it Be a Tax Write-Off? | Mark J Kohler | CPA | Attorney

How would you like to write off all your student debt as a tax write off? Yeah, I know it's a unique question and I get asked that question all the time. And so I thought I got to shoot a video on this and address what the options are. They're not great, but at least you're going to get the straight answer. My name is Mark Kohler. I'm a CPA attorney, best selling author, written radio show host, blah blah, blah. But I help small business owners and taxpaying Americans around the country save taxes, better live their dream. Well, going into college debt is a huge part of a lot of people's dream and there's a lot of people, thousands of Americans with six figure student debt. Well, we need to talk about how to maybe get a tax write off when you're starting to pay it down and some ways to attack it. But let me just say right off the bat, straight answer, there's no way to just get a tax write off for paying off your student debt. Now, you can write off the student loan interest, but it phases out. Now I'm going to get creative with some other options here in a minute. But you can't generally write off your student debt as a expense. There's no line item for that on your tax return without a little bit of creativity. But you can write off the student loan interest. Yeah, up to a whopping $2,500 worth of student interest. But the bad news is too, it phases out. If you're single and make more than 80 grand, no write off. Married filing joint, more than 160 grand, no write off. So if you went to school to make a lot of money in a profession that required a lot of student debt, now you can't even write off the student loan interest to pay off your student debt. Now, as you can see already, this video is not about how to get out of the student debt. What whether through bankruptcy or negotiation with the bank or some other credit counseling procedure. And I highly recommend you look at all your options for that. And there's a lot out there and a lot of research you can do on that topic. But I want to talk about again how you might be able to write off that student loan debt in some creative ways. Let's go to the whiteboard. Now for those of you that have already watched a lot of my videos, hopefully on my YouTube channel, you've already subscribed any tax strategy you can think of, I'm trying to do a video on it. Well, small business is a huge part of that and I'm going to show you my typical structure on my whiteboard of how it would look. And if you came out of school and got student debt to start a small business as a professional, maybe as an architect, a doctor, a dentist, a lawyer, an engineer, I don't know, maybe you're working for a big firm with the W2 right now. But if you don't have a small business, your options completely disappear for the most part, unless you're trying to write off your interest. But here's a couple ideas you might like. Now this is where the first creative option comes into play. And that's for those of you that are parents that might be helping your kids by paying for some of their college debt. And then that's going to play into some other strategies for you that have a small business that came out of school with student debt. So hang with me here. So what I do, as many of you know, is divide your life into two sides. You've got ops over here and you've got assets over here. Now this would be things like a rental property business in an llc or, or maybe an operational business, Internet marketing, sales services, product, restaurant, dentist, doctor, engineer, lawyer, accountant, real estate broker, real estate flipper, right, all that, that's ops. And you're going to generally be in an S corporation. Now if you're paying taxes and then paying for your kids student debt, there's no write off, you know that. So what I want you to do is change the methodology here. What I'd like to do is make sure that your kids, your adult children that are now out of college, on your board of directors. And if they're on your board of directors and they're helping you with maybe some marketing, business management, office duties, maybe just giving advice and sales support, maybe they're helping manage your rental property in the town where they live. If you can coordinate your rentals, where your kids are going on to their careers and you're still helping with student debt, they're on your board of advisors, something we do when we set up LLCs for clients. That's why I want you to set up LLCs at a real law firm. Because we're going to think outside the box to help you get tax write offs. Rather than click, click with a mouse and set up your own entity, call me, we'll save you 10 times that. So I want you to have a board of advisors in your llc, which could be your kids. And what you want to say is, hey, if I'm going to pay your student Debt, you can help me out in my business. So I want you on the board of directors, I want you doing some meetings with you, I want you doing some financial analysis, some support, some help, some bookkeeping or something, and maybe even manage my rental property. Now, you're going to give your kids a 1099 for helping you, which is going to be used to pay that student debt. So that student debt becomes a write off because you're paying them to help you in your business, helping you manage the rental properties so that 1099 becomes a great tax write off, which you weren't getting before. And your kids are going to probably be in a lower tax bracket than you. And with the new standard deductions being doubled, they may not pay any tax on that 1099. Generally, they may be paying tax on their own business, but not on this. Right. You could finagle a way to pull this off, but this is where you use family planning to shift income to a different family member in a lower tax bracket. Now, in no way, shape or form am I alluding to a scam or some sort of sham or any S word where you're ripping off the irs. The this is your kids legitimately helping you in your business. And for legitimate pay, you're going to 1099 them. And at Christmas time, they love it. They get a 1099 in their Christmas stocking and they're like, oh, this is great. What is this? Well, they'll find out soon enough. But the beauty here is you are now getting a tax write off for paying them to pay off student debt rather than you just paying taxes at your bracket and paying student debt. That's creative option number one. Now creative option number two for those of you with paying your own student debt, which most of us are probably doing, right? What can you do here? Let's think of that family shifting of income again. Now let's say legitimately again, I don't want any IRS agent or otherwise watching this thinking Mark's coming up with this, you know, some sort of top 10 scam to rip off the IRS. What I'm saying is maybe your mom or dad that are helping you on the board of directors run your new business, your parents may be retired and you've just got out of college with maybe graduate school and you've now started your dental practice and you've got a huge student debt and your mom or dad are retired during a much lower tax bracket than you, and you say, hey, mom and dad, I'm going to pay you to Serve on my board of directors. And would you pay off my student debt for me a little? You know, maybe you gift. Oh, sorry, don't use the gift word from your direction. You're going to 1099 them for them being a subcontractor. Then they're going to gift you money by paying down some of your debt. Well, in 2018, the gift exemption is $15,000 per person. So you could literally pay mom and dad $30,000 on a 1099 for serving legitimately on your board of directors or in your business. And then they could turn around and gift you money by paying down your student debt and thereby you have shifted income into their tax bracket to help them with their taxes. You might gift them some money, but you're paying down your student debt in a more creative manner. Now, guys, I know some of you may hate that, Some of you that are tax professionals may go, mark, that is really pushing the envelope. That's a little too sneaky. But hey, we got to get creative here. The student debt in America is a crisis. It's not getting forgiven. There are some negotiation tactics in bankruptcy, but it's tough. I want people to pay off their student debt. I mean, it's a crisis that could affect us taxpaying Americans if we have to dig, you know, unbury this and dig people out of their holes. But I wanted to just talk about some creative options where you really should have your parents or your children serving on these board of directors or board of advisors and you could be taking a tax write off to pay them, who then turn around and gift you some money to pay down that student debt payment every month. Run the numbers, look at your options, talk to your tax professional, have them watch this video. And you tax professionals out there, don't be mad at me. I'm trying to think outside the box of ways you can legitimately get a tax write off to somehow backdoor in some payments under that student debt bucket. Thanks so much for watching that video and I want to be your source for tax and legal strategies. It's hard enough to live the American dream without being out on the web, on Google, trying to find answers to complex questions and just clicking a mouse, hoping you got it right. My team and I want to be a huge resource to you, the law firm, accounting firm, my education resources on my site. Please continue to follow these strategies. I know they'll save you thousands. Now click here if you want to be a part of my newsletter. It's awesome. Weekly updates and deadlines and strategies and tips Also subscribe to my YouTube channel. You'll love it. And make sure to click the bell icon so you get a little ping whenever there's a new video. And finally, check out my site, marjkohler.com with all sorts of videos, probably 70 plus videos, 30 plus hours of content that'll save you thousands of.