Student Loan Repayments And Taxes
Student loan benefits are becoming the premiere perk a company can offer and for good reason: Employees stay with their company longer, which increases retention, and HR directors are able to bring in more capable talent.
But, as companies dive into student loan repayments, one question seems to go unasked: Who pays the taxes?
Because student loan repayment is a newer benefit, there’s ambiguity around who pays the tax. With Vault, a company has three options, assuming an employee receives a contribution of $100 per month:
- EMPLOYER PAYS TAX: The employee gets a contribution sent to their student loan company, and the employer pays the tax as if it was an employee bonus.
- EMPLOYEE PAYS TAX: The employee receives a W-2 at the end of the year. This contribution will be labeled as income, resulting in taxes owed by the employee.
- THE TAX IS INCLUDED: If the employer contributes $100 per month towards an employee’s student loan, the employer can choose that $60 goes to the student loan and $40 covers taxes. The burden is in the contribution.
Whatever tax option you choose, the smallest extra payment towards a student loan makes a difference in your employee’s lives.