VMLRP Tax Allowance
Loan repayments made on your behalf by the VMLRP are considered taxable income to you by the Internal 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 VMLRP.
The VMLRP Tax Allowance is the sum of federal tax payments made directly to your IRS tax account within a calendar year to offset the increased federal taxes that result from VMLRP income. Each time a VMLRP loan repayment is made on your behalf, NIFA also makes a federal tax payment equal to 39 percent of the loan repayment amount. These tax payments are not tax-exempt and will be reported to the IRS along with loan payments. A 1099-G form is mailed to you no later than January 31 of the following calendar year.
NIFA will not make state or local tax payments on your behalf, nor will it pay any additional VMLRP-related federal taxes you may owe beyond the 39 percent tax payments described above.
If you have additional questions, please send us an email or speak to a certified tax practitioner in your state.
For further information contact: VMLRP
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