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Corporate Student Loans
If you own a corporation and you want to lend money to your child for his or her education, you can arrange a loan from the corporation to the child. If the child does not repay the loan right away, it will be included in the child’s income for that year, assuming you can show the loan was made by virtue of your stockholder status and not employee status. If the child’s income is low, the loan amount will be taxed at a low marginal rate. If your child repays the loan later, the child can claim a deduction in the year he or she repays the loan. The repayment should be made in a year when the child has a high income to get the most benefit from higher marginal tax rates. If your child does not repay the loan, some complications occur and should be discussed with your tax advisor.
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