Tax Deductible Student Loan Interest

If you’re paying off student loans, you may be wondering if your payments are tax deductible. The answer is yes—but with some important caveats. In general, the interest you pay on qualified education loans can reduce the amount of income tax that you owe. However, there are strict limits on how much interest qualifies for this deduction, and certain other requirements must also be met for it to work out in your favor. Here’s what you need to know about how student loan interest reduces your taxes:

There are two main ways that student loan interest is tax deductible.

There are two main ways that student loan interest is tax deductible:

• You can deduct the actual amount of your student loan payments on your tax return. This is called “above-the-line” deduction, which means it reduces your adjusted gross income (AGI) before you figure out what you owe in taxes. So if your AGI is $50,000 and you paid $5,000 in student loan interest last year, that would reduce your taxable income to $45,000 for the year. To determine how much above-the-line deduction you’re eligible for, multiply $2,500 by the total number of months during which you made payments during the year.* For example: If you paid $2,500 monthly over 12 months (which works out to exactly $30k), this works out to an above-the-line deduction of 0*(12*$2500)/12 = 0 which means nothing! 2. You can also deduct up to $2,500 per tax return as long as it doesn’t exceed more than what we previously calculated above – meaning if someone claims this option they cannot also claim itemizing their deductions.* You may also be able to deduct any remaining interest after taking both options into account; see below!

You may be able to deduct up to $2,500 in student loan interest paid in the last year, without having to itemize deductions.

You may be able to deduct up to $2,500 in student loan interest paid in the last year, without having to itemize deductions.

The deduction is available if you paid interest on a qualified student loan. It also applies if you are legally married and file a joint return. But the deduction phases out at modified adjusted gross income (MAGI) of $80,000 or more for single filers and heads of households, or $160,000 or more for married couples filing jointly.

You’ll need IRS Form 1040 or 1040A and IRS Schedule 1 to claim this tax break on your federal tax return for 2019. More information about how to claim the deduction is available from the IRS website

If you do itemize your deductions, you may be able to deduct any remaining student loan interest.

If you do itemize your deductions, you may be able to deduct any remaining student loan interest. To claim this deduction, you must meet the following requirements:

• You must be legally obligated to make the payments. If anyone else is making payments on your behalf and they are not legally obligated to do so, then they can’t claim the deduction.
• You must pay interest on a qualified student loan. The definition of “qualified” is quite broad and includes: 1) federal education loans; 2) private education loans; 3) graduate school loans; 4) medical school loans; 5) law school loans; 6) home equity conversion mortgage (HECM); 7) veterans’ educational benefits from VA; 8) certain state or local government obligations that are used for post-secondary education expenses (i.e., bonds).

If you meet certain income thresholds, the deduction for student loan interest is phased out or completely eliminated.

If you’re filing as a single taxpayer, your deduction may be phased out if your modified adjusted gross income is $65,000 or more. If you file as a head of household and you have one qualifying child and modified adjusted gross income of $75,000 or more ($155,000 or more if married filing jointly), then the deduction for student loan interest will be phased out.

If you meet certain income thresholds in 2018 (based on your filing status), the deduction for student loan interest is completely eliminated . For example: You cannot claim the deduction for student loan interest if your modified adjusted gross income exceeds $70,000 if filing as single or head of household; $120,000 if married filing jointly; $80,000 if married filing separately; and $55,000 if another situation applies to you (for example divorced).

A married couple filing jointly can only claim the student loan interest deduction if neither spouse was claimed as a dependent on someone else’s tax return.

You can only claim the student loan interest deduction if neither spouse was claimed as a dependent on someone else’s tax return. If both spouses are claimed by someone else as dependents, neither of you can claim the deduction. However, if only one spouse is claimed as a dependent, then that person could still claim the deduction.

If you’re married and file jointly with your spouse:

• You must be attaining age 24 or younger during the tax year in order to qualify for this credit (unless it’s an independent student). For example, if your son turned 24 years old before Jan 1st 2016 but filed his taxes after Jan 1st 2016 due to his income being too high for him to qualify for any refund/refunds that have been sent out so far – he would not qualify for this credit until he turns 25 years old in 2020 (2 years from now).

Student loan interest can reduce your taxes, but there are many limits and restrictions for the deduction.

Student loan interest is tax-deductible, but there are many limits and restrictions for the deduction.

Only applies to student loan interest you paid during the year. If you’re married and filing jointly, it must be your spouse’s or your own separate debt that was incurred for the purpose of paying for education.

Only applies to loans taken out to pay for qualified education expenses, such as tuition and fees required for enrollment or attendance at an eligible educational institution. Loans from a qualified employer plan (a Section 125 plan), such as health insurance premiums paid from an FSA account aren’t eligible expenses unless they’re used exclusively to pay qualified higher education expenses at an eligible educational institution.

Only applies if all four conditions below are met: 1) You’re legally obligated on the federal income tax return; 2) The funds were received by someone who wasn’t legally obligated; 3) Such amount is not used in computing adjusted gross income (AGI); 4) Such amount was received under a qualifying repayment program between January 1 and December 31st of the calendar year prior to filing Form 1040/1040A/1040EZ taxes returns

Student loan interest is a tax deduction that can help you save some of your hard-earned money. However, it’s not as simple to claim as a deduction for mortgage interest or charitable donations. If you’re interested in getting this deduction, there are things you should know before filing your taxes so that you don’t get hit with an underpayment penalty by the IRS.