1099-NEC State paid student loan as teacher

user17701452818 · ‎February 3, 2026

My wife is a teacher in Texas and the State paid off a portion of her student loans this year. They sent her a 1099-NEC form though for the amount they paid off and TurboTax is asking questions that don't really make sense since she isn't self-employed, she is a government employee of a school district, and the Texas education board made a payment towards her student loans as a result of her employment as a teacher. But based on how TurboTax is wanting this entered this would result in significant self-employment taxes when it isn't self-employment income.

I've seen some other posts to enter it as 1099-MISC but that isn't the form we got and worried that opens us up to IRS fun or other comments to enter it as a 1099-NEC but select "Hobby" which also seems weird. There are other posts that say there should be an additional question of "Does one of these uncommon situations apply?" Select "This is not money earned as an employee or self-employed individual, it is from a sporadic activity" but I'm not seeing that option. That seems like it would make the most sense though. Any help on how to handle this would be appreciated.

Hal_Al · ‎February 3, 2026

Previous reply deleted. Apparently last year's way of handling this no longer works ( "Does one of these uncommon situations apply?", leading to reporting it as sporadic income, is no longer there).

Since this is essentially additional compensation, paying social security and Medicare tax appears appropriate. "Self Employment Tax (SET) is how the self employed pay their social security and Medicare tax.

subiedude1212 · ‎February 7, 2026

I'm having this same issue. Are you saying that the best choice would be Self employment income? That doesn't seem right since I'm not self employed.

DaveF1006 · ‎February 12, 2026

The best way to report this income as not Self-Employment income is to do the following.

Go to Federal > Wages & Income.
Scroll to the very bottom to Less Common Income.
Select Start/Revisit next to Miscellaneous Income, 1099-A, 1099-C.
Select Start next to Other reportable income (the very last option).
Answer Yes to "Any Other Taxable Income?"
Description: Enter "1099-NEC Texas Higher Education Coordinating Board" (it is helpful to reference the form so the IRS can match it to their records).
Amount: Enter the total amount from Box 1 of the 1099-NEC.