A Question About Paying Off My Student Loans

[justhopingandsearching]

My question is this: if I get a job strictly to pay off my student loans, and every single cent earned literally goes to paying off those loans, will I need to still pay the Government income tax?

[reidchj]

I'm not sure I understand your question. If you have a job and making income then you have to pay income taxes. No way around it unless you are being paid cash under the table. You will get to deduct the interest paid on your student loans but no way that will cover your taxes owed.

[justhopingandsearching]

Originally Posted by reidchj

I'm not sure I understand your question. If you have a job and making income then you have to pay income taxes. No way around it unless you are being paid cash under the table. You will get to deduct the interest paid on your student loans but no way that will cover your taxes owed.

I get a job, and 100% of the money earned goes to the loans. For example, let's say I earned $20 dollars from working, I take that $20 dollars and send it to the loan companies.

I know I will have to file for taxes, my question was if I can prove that 100% of the money earned went to my loans, will the government still expect money from me (personal income tax) if I actually have no money (it all went to the loans)?

[reidchj]

Originally Posted by justhopingandsearching

I know I will have to file for taxes, my question was if I can prove that 100% of the money earned went to my loans, will the government still expect money from me (personal income tax) if I actually have no money (it all went to the loans)?

ummm yea.

The government doesn't care what you spent it on or how much you have left. They want their cut of what you made. If at the end of the year you don't have the money to pay them then they fine you and charge interest on your debt until it's paid. Continue not to pay them and they garnish any wages you may have, take anything of value you have, and/or just put you in jail.

This shouldn't really be an issue. 99% of the time your income taxes come off the top. State and federal income tax, plus FICA etc, should be listed on your check stub as being paid before you even got your check. If your not making that much and depending on your claims and deductions, you shouldn't have to pay anything at the end of the year and may even get a refund if you overpaid.

[justhopingandsearching]

Originally Posted by reidchj

ummm yea.

The government doesn't care what you spent it on or how much you have left. They want their cut of what you made. If at the end of the year you don't have the money to pay them then they fine you and charge interest on your debt until it's paid. Continue not to pay them and they garnish any wages you may have, take anything of value you have, and/or just put you in jail.

This shouldn't really be an issue. 99% of the time your income taxes come off the top. State and federal income tax, plus FICA etc, should be listed on your check stub as being paid before you even got your check. If your not making that much and depending on your claims and deductions, you shouldn't have to pay anything at the end of the year and may even get a refund if you overpaid.

Oh ok. I was just generally curious because I've been trying to think up ways to aggressively pay off my loans.

So, I'll set aside 40% of my earned income for taxes, and let the rest go to the loans.

Thanks!

[reidchj]

You don't have to do that.

I assume you mean a regular job type job i.e. a restaurant or office worker, etc. As long as you fill out your W-4 correctly when you start, taxes at the end of the year really shouldn't be an issue and you can aggressively pay your paycheck towards your loans.

Good luck!

[justhopingandsearching]

Originally Posted by reidchj

You don't have to do that.

I assume you mean a regular job type job i.e. a restaurant or office worker, etc.

Yes, fast food employee.

Originally Posted by reidchj

You don't have to do that.

As long as you fill out your W-4 correctly when you start, taxes at the end of the year really shouldn't be an issue and you can aggressively pay your paycheck towards your loans.

Good luck!

I don't understand. I will need to pay taxes, but it won't be that much? What kind of percentage of my earned income should I set aside then for taxes?

[SatvikBeri]

Originally Posted by justhopingandsearching

Yes, fast food employee.



I don't understand. I will need to pay taxes, but it won't be that much? What kind of percentage of my earned income should I set aside then for taxes?

What country are you in?

In the USA, the way it normally works is that your taxes are deducted BEFORE you receive each paycheck. Then in April, you do a check to see whether you paid too much or too little in taxes throughout the year, and make (usually minor) adjustments accordingly.

So you can spend all the money that you actually receive in your paycheck on your loans, without having to worry about paying taxes separately.

The other thing to note is that you can deduct the INTEREST you pay on your student loans from your taxable income, but not the base amount of the loans themselves.

[justhopingandsearching]

Originally Posted by SatvikBeri

What country are you in?

The US.

Originally Posted by SatvikBeri

In the USA, the way it normally works is that your taxes are deducted BEFORE you receive each paycheck. Then in April, you do a check to see whether you paid too much or too little in taxes throughout the year, and make (usually minor) adjustments accordingly.

So you can spend all the money that you actually receive in your paycheck on your loans, without having to worry about paying taxes separately.

The other thing to note is that you can deduct the INTEREST you pay on your student loans from your taxable income, but not the base amount of the loans themselves.

Thanks, I think I understand now.

You guys have really illuminated how little I know. Man, I definitely have much to add to my personal education. Step 1: eliminate debt. Step 2: learn about taxes.

Once again, thank you, SatvikBeri and reidchj.

[Bradman]

I'm pretty sure if you earn less than 18k you don't need to file with fed, but you might want to anyway because you'll probably get most of your withholding back using standard deductions.