Today TaxMama hears from Valoree in the Tax Quips Forum with this question. “My client received a sign-on bonus of $30,000. He worked awhile for the company, but left before the contract was up. He got a loan to pay back the $30,000 – and paid about $2,400.00 in interest. Is it possible to deduct $30,000.00 from his income?”
Dear Valoree,
That’s such a shame. Generally the sign-on bonuses don’t have to repaid if you are there for a specified amount of time. It is SO costly to pay them back. What a pity.
And, as you know…but wish it were not true,… since the Tax Reform Act of 1986, personal interest is not deductible. A job is personal. Paying back the bonus is personal. Sorry, not deductible.
However, the $30,000 bonus? Yes, you may deduct that as a Miscellaneous Itemized Deduction, subject to the 2% of AGI reduction.
And remember, you can find answers to all kinds of questions about wage repayments and other tax issues, free. Where? Where else? At www.TaxMama.com.
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