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, 11 June, 2020

Cares Act Education Benefits

A Student Loan COVID-19 Benefit!

If an educational fringe benefit would help you attract or retain employees, then you will be interested in a little-known section of the CARES Act.  It allows an employer to pay and deduct up to $5,250 of an employee’s higher education student loan debt – both principal and interest, if paid by December 31, 2020.  The benefit is not taxable to the employee. 

Now, if you are a business owner with student debt, then I know what you are thinking, but don’t get excited yet.  As an owner-employee of your corporation, you qualify, but no more than 5% of the total benefits paid by the employer can be for owners or family members. 

The CARES Act PPP loan forgives loan money used to compensate team members affected by COVID-19 defined as salaries, wages, commissions, or similar payment. The CARES Act misses listing education benefits as eligible covered payments for forgiveness. However, we expect non-taxable education benefits paid through payroll as cash compensation may qualify for loan forgiveness.  Paying compensation to your team in the PPP covered period sounds like great sense to achieve 100% PPP loan forgiveness. Education benefits paid out of PPP loan funds are not tax-deductible since it is paid for by the government. It will, however, be tax-deductible for the employer if paid outside the covered period or with non-PPP funds.  

We hope this DrillBit helps you while your business recovers from COVID-19 created interruption!  Let us know if you have questions on this or any other COVID-related financial concerns.

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Drilldown Solution offers a full suite of financial services that include bookkeeping, accounting, tax preparation, and dental consulting. We have the expert team to help any dental practice thrive, even under the current COVID-19 pandemic circumstances. We accomplish this with a three-part system comprised of patient-experience excellence, financial focused operations, and accountability.

Our goal at Drilldown Solution is to put your dental practice in the best financial position possible, utilizing proactive processes and personal care!

Note: The material and contents provided in this article are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.