Renting house to adult child?

[AndyS]

Hello all, I haven't been on here for some time. For those who don't remember I retired from a Federal LEO position at 49 eight years ago with thirty years combined military/federal service. We are of relatively modest means, but comfortable.

Looking today for some suggestions about a situation with a second home we bought this past year.

We live in FL and our only child (23) graduated from a State university here this past spring with her bachelor's degree. She landed a top-notch 4 year doctoral program out in Texas (Baylor) that actually pays her about 10 to 12k a year to attend. This amount will increase a bit each year topping to about 25k her fourth year. According to what I've been able to find out .... the income should count as W-2 income as she perform 20 hours of work each week for the university to receive it. We've carried her as a dependent up to this year ... and guessing it will be advantageous to do her own taxes from this year onward.

We agreed with her when applying to this particular highly competitive program that if she got in we would cover her housing, car expenses, and health insurance for the four years. She takes care of her own utilities, food, clothes, misc school expenses, etc. It's something we wanted to do for her. She put herself through four years of undergraduate with high marks on a double academic scholarship and living at home and we'd like to help her finish her lengthy education with zero debt.

Looking at house/apartment prices out in Waco and the length of her stay there, we determined to buy last May a 1650 sq ft newer home close to campus for 165k with a combo of cash & borrowing 90k for 15 years against the equity in our paid-for home here in FL.

I've only just started reviewing IRS 280 on it. I'm no tax wizard, we don't even have enough deductions to itemize anymore. We have pretty high medical expenses each year ... but not enough to justify itemizing without other deductions to go along with them.

So the question is ... can we set this up as a rental to her with her paying us out of her university income, and then gift the money back in some other manner so as to take advantage of being able to deduct property tax, mortgage interest, etc?

To further complicate matters ... she is contemplating taking on a roommate after the first of the year who we will probably agree on paying approx $350 a month to us to stay there.

Is setting this up as a Schedule E rental something that is possible or advisable? I'd really like to get some kind of tax break on on the mortgage interest and particularly the high property tax in Texas. Is it something I really ought to go see a CPA about? Or is it something I probably really don't want to mess around with potentially causing us IRS troubles?

Thanks in advance for any info/suggestions.
AndyS

 

[Jerry1]

I've long been removed from doing taxes so please check this, but I think a second home is fully deductible. I don't think you'd have to do anything special. Just prove that you're paying the interest and taxes and you should be good to go. I also think you should give some consideration to your first comment about her no longer being a dependent. It may be possible to prove you're paying for more than half of her existence and she may still be a dependent. Her deduction/exemption will likely be worth more to you than to her if you qualify. Of course it could hurt her on her taxes so you just have to run them both ways and if it's better for you to have her as a dependent, refund her the difference in her taxes.

 

[38Chevy454]

I would definitely do the schedule E. Have her pay a fair rent, so it is legit from IRS standpoint. Take all of the normal Sch E deductions and benefit your taxes. Just because daughter is the tenant has nothing to do with legality of it being a rental property for your taxes. I would have a written lease agreement to further show legitimacy.

Gifting money to her is a totally different issue. That is just you helping her out with college expenses. Something many parents do.

I would treat the roommate as this: You lease the house to daughter, she subleases a room out. That is her money and separate from your lease and rental income. How your daughter treats the roommate's contribution is on her taxes. In other words, the daughter pays you full rent, she is the lease tenant.

Would not hurt to run by a tax professional like a CPA, but I do not see any problem with your proposal.

 

[ivinsfan]

IRS doesn't know who rents your house...I think the key would be if you want to deduct the expenses be certain you charge your DD market rate.

 

[PatrickA5]

I looked into this extensively a few years back when I started renting a house to my daughter. After a lot of research, I decided to not mess with a Schedule E. I found several cases where the IRS disallowed certain deductions even though the relative was paying full rent. In each of the cases, the IRS proved that it was a sham, since the taxpayer was basically giving back the rent in gifts. Odds are very slim that you'd get caught, but it wasn't worth it to me. You can still deduct the interest/taxes on Schedule A as a second home, but the other expenses (Depreciation, etc) aren't deductible. You have to count the income on Line 21 (other income) as a not for profit rental.

 

[ivinsfan]

If you aren't thinking of keeping the place long term this might not be that big of deal. If/when you sell the deprecation recapture etc, will reduce the tax benefit of the Schedule D...

OTOH if you don't already itemize a 90K loan isn't going to get you enough interest payment to help you in any way.

I'd have the roommate send me a check personally as the fact you have 2 different renters and one is not related will boost your standing with the IRS...

 

[harley]

I looked into this extensively a few years back when I started renting a house to my daughter. After a lot of research, I decided to not mess with a Schedule E. I found several cases where the IRS disallowed certain deductions even though the relative was paying full rent. In each of the cases, the IRS proved that it was a sham, since the taxpayer was basically giving back the rent in gifts. Odds are very slim that you'd get caught, but it wasn't worth it to me. You can still deduct the interest/taxes on Schedule A as a second home, but the other expenses (Depreciation, etc) aren't deductible. You have to count the income on Line 21 (other income) as a not for profit rental.

This is how I handled it too. I was charging below market value, so I couldn't deduct a number of things. Just deducted the basics (taxes mostly) and declared the income as "other". Never had a problem.

 

[AndyS]

UPDATE: Well, dang ... seems I may now have bigger worries than tax treatment of the Waco house we bought.

My kid receives approx 12k a year as a research assistant at Baylor, but also receives full tuition remission for her doctoral graduate studies. That's probably about 40k worth of tuition remission. (Baylor's not exactly a cheap school to go to, esp graduate tuition which is even higher than undergrad) Under the new tax proposals that 40k tuition-remission may now become taxable for next year !!!!

Don't want to get all political on here (I know the rules), but ... dang!!! Rest assured I have already been in contact with my Congressman and both of my Senators. (Not that I have much confidence that will actually do any good.)

 

[Texas Proud]

UPDATE: Well, dang ... seems I may now have bigger worries than tax treatment of the Waco house we bought.

My kid receives approx 12k a year as a research assistant at Baylor, but also receives full tuition remission for her doctoral graduate studies. That's probably about 40k worth of tuition remission. (Baylor's not exactly a cheap school to go to, esp graduate tuition which is even higher than undergrad) Under the new tax proposals that 40k tuition-remission may now become taxable for next year !!!!

Don't want to get all political on here (I know the rules), but ... dang!!! Rest assured I have already been in contact with my Congressman and both of my Senators. (Not that I have much confidence that will actually do any good.)

And what are you complaining about? That she has to pay tax on tuition amounts she got value for? IOW, if she had won $40K on a game show would you not consider that taxable?

From an article....

Scholarships considered taxable income
Now, let’s say your daughter is a grad student with a fellowship that requires her to be a teaching assistant. In this case, the tax rules are different. That’s because scholarship or fellowship money that represents compensation is taxable — regardless of how the money is used. So, even if a $20,000 teaching assistant fellowship went primarily to pay for tuition and books, that $20,000 would still be considered taxable income. The student would receive a W-2 from the school and would have to file a tax return.

 

[AndyS]

And what are you complaining about? That she has to pay tax on tuition amounts she got value for? IOW, if she had won $40K on a game show would you not consider that taxable?

From an article....

Scholarships considered taxable income
Now, let’s say your daughter is a grad student with a fellowship that requires her to be a teaching assistant. In this case, the tax rules are different. That’s because scholarship or fellowship money that represents compensation is taxable — regardless of how the money is used. So, even if a $20,000 teaching assistant fellowship went primarily to pay for tuition and books, that $20,000 would still be considered taxable income. The student would receive a W-2 from the school and would have to file a tax return.

What am I complaining about?

Well, like I said ... I don't want to get all political about it, but ... well, changing the rules in mid-stream on us. That's what I'm complaining about.

She gets approx 12k year (W-2 taxable) for being a research assistant 20 hours per week. That will go up a bit incrementally in her 2nd, 3rd, and 4th years. This ain't like getting a night-school/internet two year MBA .. it's a full-time 4 year doctoral program. It's pretty much impossible to try to supplement one's living expenses with any kind of part time work outside the program. It's a 12 month per year 60 to 80 per hour work/study week thing ... with a little time off at Thanksgiving & Christmas.

But as to the tuition-remission part .... that's going to be about 4k in taxes I'm guessing I'll have to come up with (on my approx 70k pre-tax income ... and we have Stage 4 cancer-size medical bills here at home.) ... she certainly can't come up with it what with work/study 60 to 80 hours per week in her doctoral program (unless she borrows it, and I'll start driving for Uber before I let her do that ... she paid her entire undergrad tuition herself through merit-based academic scholarships, and I won't hear of it.)

It's not like the approx 40k tuition/fees goes into her pocket & then she gets to choose whether to spend it on grad school tuition or not. It goes directly from her particular program to the university at large without ever crossing her bank account.

A "game show" ... seriously? Did you really just compare this to a "game show" prize? This ain't no "game show" prize, I assure you. And, pardon me for being absolutely livid at your comment on that. So much for doing what was supposed to be the "right thing" working her butt off in high school and undergrad to get scholarships and get into the program in the first place. They even put her freaking picture on the wall due to her undergad academic and research achievements at the small State U. she chose to go to (instead of Stanford and Yale, where she did, in fact, have acceptances, but chose not to go due to her concern for not causing her parents undue tuition and living exp. bills.) And the doctoral program she got into at Baylor? .... 6 positions for approx 250+ qualified applicants per year. So much for helping the "middle-class." But like I said ... I don't want to get all "political" about it. Just burns my butt!

Well, I guess we'll see how the whole tax proposal thing shakes out in the end. Maybe they'll drop it? Or, failing that, maybe Baylor will restructure the financial package so as it's non-taxable again, or not-as-taxable. I know Baylor's got some deep pockets so there's hope for that.

And I will admit ... we're way off-topic now & skating on thin Porky ice here, so I'll let it go ... just wanted to vent.

(btw ...if you must know, her program is PsyD. Doctorate in Psychology, not Phd. academic type psychology. PsyD is real where-the-rubber-meets-the-road psychology. The best two PsyD programs in the country are at Rutgers and Baylor. Clinically based programs. Her primary interests are working with combat veterans with issues and their families who live with them. Some may think that's all BS .. but I have an ex-Marine combat veteran next door neighbor who can assure you it's not. )

 

[pb4uski]

If an employer pays the personal expenses of an employee then the amount paid is deemed compensation to the employee and the employee has to pay tax on the value of what they received.... if my employer paid for my car, or country club dues or whatever, the value of tose are taxable to me. Similarly, if I make a charitable contribution and receive something of value in return, the deduction is reduced for the value of what I received.

I think a valid argument can be made that tuition remediation is similar... your DD is receiving $40k of services that would be personal expense and $12k in cash in exchange for her work for the university so her compensation for her work is $52k... so the change you object to is just leveling the playing field with other principles in recognizing earnings.

You and your DD would get caught up in the fix if the change goes through and that is unfortunate and I sympathize, but IMO the change makes sense. Perhaps the hardship that the change will cause people currently in graduate and doctoral programs will be recognized and they will be grandfathered.

Any time the rules are changed, there will be winners and losers... that is just the way it is.... even if current graduate and doctoral students were grandfathered, those who will begin a program shortly will feel like they are being screwed by the change.

 

[gauss]

Many education expenses may go away under the tax reform proposal that was made public, including, I believe, the student loan interest deduction.

 

[RE2Boys]

See pages 4 and 5 and worksheet of Pub 970 to determine the taxable portion of her scholarship/grant. She may receive a W2 for her required duties.
https://www.irs.gov/pub/irs-pdf/p970.pdf

And subject to change by Congress. The current tax proposal eliminates the use of US Savings Bond interest deduction for qualified educational expenses for me, it was half of my kids education fund.....with less than two months notice.

 

[Texas Proud]

What am I complaining about?

Well, like I said ... I don't want to get all political about it, but ... well, changing the rules in mid-stream on us. That's what I'm complaining about.

She gets approx 12k year (W-2 taxable) for being a research assistant 20 hours per week. That will go up a bit incrementally in her 2nd, 3rd, and 4th years. This ain't like getting a night-school/internet two year MBA .. it's a full-time 4 year doctoral program. It's pretty much impossible to try to supplement one's living expenses with any kind of part time work outside the program. It's a 12 month per year 60 to 80 per hour work/study week thing ... with a little time off at Thanksgiving & Christmas.

But as to the tuition-remission part .... that's going to be about 4k in taxes I'm guessing I'll have to come up with (on my approx 70k pre-tax income ... and we have Stage 4 cancer-size medical bills here at home.) ... she certainly can't come up with it what with work/study 60 to 80 hours per week in her doctoral program (unless she borrows it, and I'll start driving for Uber before I let her do that ... she paid her entire undergrad tuition herself through merit-based academic scholarships, and I won't hear of it.)

It's not like the approx 40k tuition/fees goes into her pocket & then she gets to choose whether to spend it on grad school tuition or not. It goes directly from her particular program to the university at large without ever crossing her bank account.

A "game show" ... seriously? Did you really just compare this to a "game show" prize? This ain't no "game show" prize, I assure you. And, pardon me for being absolutely livid at your comment on that. So much for doing what was supposed to be the "right thing" working her butt off in high school and undergrad to get scholarships and get into the program in the first place. They even put her freaking picture on the wall due to her undergad academic and research achievements at the small State U. she chose to go to (instead of Stanford and Yale, where she did, in fact, have acceptances, but chose not to go due to her concern for not causing her parents undue tuition and living exp. bills.) And the doctoral program she got into at Baylor? .... 6 positions for approx 250+ qualified applicants per year. So much for helping the "middle-class." But like I said ... I don't want to get all "political" about it. Just burns my butt!

Well, I guess we'll see how the whole tax proposal thing shakes out in the end. Maybe they'll drop it? Or, failing that, maybe Baylor will restructure the financial package so as it's non-taxable again, or not-as-taxable. I know Baylor's got some deep pockets so there's hope for that.

And I will admit ... we're way off-topic now & skating on thin Porky ice here, so I'll let it go ... just wanted to vent.

(btw ...if you must know, her program is PsyD. Doctorate in Psychology, not Phd. academic type psychology. PsyD is real where-the-rubber-meets-the-road psychology. The best two PsyD programs in the country are at Rutgers and Baylor. Clinically based programs. Her primary interests are working with combat veterans with issues and their families who live with them. Some may think that's all BS .. but I have an ex-Marine combat veteran next door neighbor who can assure you it's not. )

How is this changing 'in mid stream'? My nephew got an advanced degree doing the same thing years ago and had to put it down as income IIRC... I do not think this is a new thing happening...

Sorry about the other problems, but that has nothing to do with taxes except if medical expenses are not deductible next year...

And yes, I did compare it to a game show where someone is getting something of value, not paying for it, and it being taxable...

 

[ivinsfan]

You know the "mid-stream" argument means that nothing can ever change, since it's always "mid-stream" to someone.

 

[harley]

I haven't got a dog in this particular fight, but here's a question. Say she does have to get a W-2 and claim it as income. Wouldn't her tax bracket be low enough that she wouldn't have to actually pay any tax? So it would just be a book keeping and annoyance issue? Even if she had to pay some tax, it should be pretty minimal. I haven't been paying much attention to the tax bill because I don't believe it will actually be passed. So I wouldn't get my panties in too much of a twist. By the time this thing becomes law (if ever), it won't look anything like it does now. And it's not like there's anything you can do about it anyway. Wait and see, then adapt. That's my theory.

 

[ivinsfan]

What am I complaining about?

Well, like I said ... I don't want to get all political about it, but ... well, changing the rules in mid-stream on us. That's what I'm complaining about.

She gets approx 12k year (W-2 taxable) for being a research assistant 20 hours per week. That will go up a bit incrementally in her 2nd, 3rd, and 4th years. This ain't like getting a night-school/internet two year MBA .. it's a full-time 4 year doctoral program. It's pretty much impossible to try to supplement one's living expenses with any kind of part time work outside the program. It's a 12 month per year 60 to 80 per hour work/study week thing ... with a little time off at Thanksgiving & Christmas.

But as to the tuition-remission part .... that's going to be about 4k in taxes I'm guessing I'll have to come up with (on my approx 70k pre-tax income ... and we have Stage 4 cancer-size medical bills here at home.) ... she certainly can't come up with it what with work/study 60 to 80 hours per week in her doctoral program (unless she borrows it, and I'll start driving for Uber before I let her do that ... she paid her entire undergrad tuition herself through merit-based academic scholarships, and I won't hear of it.)

It's not like the approx 40k tuition/fees goes into her pocket & then she gets to choose whether to spend it on grad school tuition or not. It goes directly from her particular program to the university at large without ever crossing her bank account.

A "game show" ... seriously? Did you really just compare this to a "game show" prize? This ain't no "game show" prize, I assure you. And, pardon me for being absolutely livid at your comment on that. So much for doing what was supposed to be the "right thing" working her butt off in high school and undergrad to get scholarships and get into the program in the first place. They even put her freaking picture on the wall due to her undergad academic and research achievements at the small State U. she chose to go to (instead of Stanford and Yale, where she did, in fact, have acceptances, but chose not to go due to her concern for not causing her parents undue tuition and living exp. bills.) And the doctoral program she got into at Baylor? .... 6 positions for approx 250+ qualified applicants per year. So much for helping the "middle-class." But like I said ... I don't want to get all "political" about it. Just burns my butt!

Well, I guess we'll see how the whole tax proposal thing shakes out in the end. Maybe they'll drop it? Or, failing that, maybe Baylor will restructure the financial package so as it's non-taxable again, or not-as-taxable. I know Baylor's got some deep pockets so there's hope for that.

And I will admit ... we're way off-topic now & skating on thin Porky ice here, so I'll let it go ... just wanted to vent.

(btw ...if you must know, her program is PsyD. Doctorate in Psychology, not Phd. academic type psychology. PsyD is real where-the-rubber-meets-the-road psychology. The best two PsyD programs in the country are at Rutgers and Baylor. Clinically based programs. Her primary interests are working with combat veterans with issues and their families who live with them. Some may think that's all BS .. but I have an ex-Marine combat veteran next door neighbor who can assure you it's not. )

Well a game show, a job, a fellowship it's all income isn't it..I think that's the point. Your daughter sounds like she'll do fine no matter what. If she wants to treat vets she can join the military..I understand your point that she won't have cash to pay taxes but the college will have to sort that one out.

And I have to say it your daughter's worry and not yours. She's at least 22-23 seems very capable and your were planning on buying a house to give a nice place to live.Let her figure this out, she seems more than capable.

 

[Philliefan33]

Well a game show, a job, a fellowship it's all income isn't it..I think that's the point. Your daughter sounds like she'll do fine no matter what. If she wants to treat vets she can join the military..I understand your point that she won't have cash to pay taxes but the college will have to sort that one out.

And I have to say it your daughter's worry and not yours. She's at least 22-23 seems very capable and your were planning on buying a house to give a nice place to live.Let her figure this out, she seems more than capable.

I️ agree. There are plenty of graduate students and medical students handling this on their own/with minimal help from parents. Heck, most med school students have to take out loans for $50K plus per year.

Our own DD just finished her PhD. Her stipend was $25 K per year, and she managed to pay all of her expenses (taxes, rent, utilities, food) without help from us. We did help minimally by keeping her in our cell phone plan and maybe 2-3 shopping trips per year where I️ picked up the $200 tab.

DD’s rent ran $7-8K per year. Since you are providing a place for your daughter to live, her 12K stipend will go pretty far.

All grad students are poor.

 

[AndyS]

Our own DD just finished her PhD. Her stipend was $25 K per year, and she managed to pay all of her expenses (taxes, rent, utilities, food) without help from us. We did help minimally by keeping her in our cell phone plan and maybe 2-3 shopping trips per year where I️ picked up the $200 tab.

The tax issue here is not about her RA salary, we know she has to pay taxes on that, it's W-2 income ... and the program doesn't offer a stipend, rather the RA position. Some in her cohort were offered TA positions instead.

But as to your DD's experience. I notice you don't mention how much was her PhD tuition? Did she pay her tuition from that stipend? Take out loans to pay it? Or did the school give her full or partial tuition remission as most PhD programs do?

That's the issue. Taxation of the tuition remission amount ... money that never passes through the grad students hands. Actually, it doesn't pass through anybody's hands but is just an accounting thing between programs at the University.

Now also as to taxation of tuition remission (partial or full, some programs are just partial) as "income" ... perhaps it might help to look at it in terms of some other money an institution might not require certain persons to pay. Let's take a hospital bill for example. If you get charged less than the full "Saudi Sheik" rate at a hospital because you have a certain insurance or fall into some certain category of persons .... should you be then taxed on the amount you were not required to pay? I mean, after all ... it's like you just won a game show prize, right?

If you get a discount on a GM car because your father-in-law is a retired GM employee (as I did once) ... should you have to pay tax on the difference between what you paid & sticker price?

Or how about employee discounts ... taxable income? Veterans discounts?



Anyways ... I see in the news this morning this taxation of tuition remission issue has become an item of attention of some of our politicos in DC and looks like they may back off on it. So ... keeping our fingers crossed on that.



*

 

[AndyS]

I haven't got a dog in this particular fight, but here's a question. Say she does have to get a W-2 and claim it as income. Wouldn't her tax bracket be low enough that she wouldn't have to actually pay any tax? So it would just be a book keeping and annoyance issue? Even if she had to pay some tax, it should be pretty minimal. I haven't been paying much attention to the tax bill because I don't believe it will actually be passed. So I wouldn't get my panties in too much of a twist. By the time this thing becomes law (if ever), it won't look anything like it does now. And it's not like there's anything you can do about it anyway. Wait and see, then adapt. That's my theory.

No ... her RA salary of approx 12k a year is W-2 taxable. Her tuition/fees remission is probably more in the range of 40k. So that'd put her at 50k+ taxable income as a single person ... when only 12k actually passes through her hands.

 

[AndyS]

.... If she wants to treat vets she can join the military..

The military doesn't train PsyD and PhD psychologists ... they recruit them at internship time (the 5th year is internship.) And they have to come from an APA accredited program which Baylor is ... many PsyD and some PhD programs are not.

 

[pb4uski]

But... even if the worst comes to pass then her tax bill would be $4k a year for 4 years, or $16k... it doesn't seem particularly outrageous for a doctorate level graduate to graduate with $16k or even $18k with interest in debt to pay off.... seems to me like you are making a mountain out of a molehill.

She's getting an education with a retail value of $160k for $16k.... that sounds fair to me.

 

[Texas Proud]

But... even if the worst comes to pass then her tax bill would be $4k a year for 4 years, or $16k... it doesn't seem particularly outrageous for a doctorate level graduate to graduate with $16k or even $18k with interest in debt to pay off.... seems to me like you are making a mountain out of a molehill.

She's getting an education with a retail value of $160k for $16k.... that sounds fair to me.

I agree... a very small price to pay to get her advanced degree....


Another nephew of mine has been going through medical school and is about to become a doctor.... his total debt load including interest is just shy of $500,000....

 

[Texas Proud]

/snip/


Now also as to taxation of tuition remission (partial or full, some programs are just partial) as "income" ... perhaps it might help to look at it in terms of some other money an institution might not require certain persons to pay. Let's take a hospital bill for example. If you get charged less than the full "Saudi Sheik" rate at a hospital because you have a certain insurance or fall into some certain category of persons .... should you be then taxed on the amount you were not required to pay? I mean, after all ... it's like you just won a game show prize, right?

If you get a discount on a GM car because your father-in-law is a retired GM employee (as I did once) ... should you have to pay tax on the difference between what you paid & sticker price?

Or how about employee discounts ... taxable income? Veterans discounts?

*

Not quite the same.... but I would wonder about the hospital bill if you were charged the rack rate and you got a big discount because you could not pay it... it is OK to charge different people different amounts for the same service... I pay the full amount to my Dr and hospital that my insurance has contracted with them.... they are not giving me that discount for free...

Same with the car... the mfg has a price for employees and family.... you pay that price... you are paying the full price.... if you were getting the car for 'free' it would be included in your salary.... we had many execs who had deemed salary due to driving a company car.... they would also have deemed salary when taking the company jet someplace that was not business related.....


Now this was a long time ago so I do not know if it still happens... I had a brother and sister who worked in the airline industry for a time... they would get 'free' tickets for my mom, but the value of the ticket was included in their income... it was not really free... I do think they were able to fly free though....

 

[Philliefan33]

But... even if the worst comes to pass then her tax bill would be $4k a year for 4 years, or $16k... it doesn't seem particularly outrageous for a doctorate level graduate to graduate with $16k or even $18k with interest in debt to pay off.... seems to me like you are making a mountain out of a molehill.

She's getting an education with a retail value of $160k for $16k.... that sounds fair to me.

That’s the point I️ was attempting (poorly, I️ suppose) to make.

My DD did not have to pay tuition, and was paid $25K (with W2 only on the paycheck, not the $35K tuition). But even if she had to borrow a little every year to pay taxes on the entire amount, she would be getting a great value. And she’d have much less debt than her four cousins who have borrowed for medical degrees.