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The LRPs and Taxes

Home > About the Programs > The LRPs and Taxes


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INCREASED INCOME MEANS INCREASED TAXES

The loan repayments made on your behalf by NIH are considered taxable income to you by the Internal
Increased Income Means Increased Taxes
Revenue Service (IRS), and will increase the federal taxes, and possibly state and local taxes, that you owe. You are always responsible for ensuring that your federal, state, local, and any other taxes are paid properly and on time, regardless of the tax-related benefits that may be provided by the NIH Loan Repayment Programs (LRPs).

LRP Tax Allowance

The LRP Tax Allowance is the sum of federal tax payments NIH makes directly to a participant’s IRS tax account within a calendar year to offset the increased federal taxes that result from LRP income. Each time NIH makes a loan repayment on behalf of LRP participants, NIH also makes a federal tax payment equal to 39 percent of the loan repayment amount (an additional tax payment at the rate of 7.5% of the loan repayment amount is made to cover social security and FICA taxes for intramural participants only). These tax payments are not tax-exempt and will be reported to the IRS along with loan payments. A 1099-G form (or a W-2 form for NIH employees) is mailed to participants no later than January 31 of the following calendar year.

Federal Tax Overpayment

In some cases, the federal tax payments made on behalf of an LRP participant for a calendar year may be greater than the increased federal taxes he/she owes for that year due to LRP income. This results in a federal tax overpayment. When a federal tax overpayment is identified, the participant may return the overpayment to NIH by mailing a check to DLR payable to the National Institutes of Health.



Date Last Updated: February 24, 2011


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