How To Get the Student Loan Interest Deduction
Student loan debt affects not only recent graduates but also older people either going back to school or paying for college for their children or grandchildren. Even though some loans might qualify for student loan forgiveness after a period of time, you still have to pay interest on the loans until then.
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It’s important to learn how you can increase your income tax refund. See what you can deduct.
Qualifying Student Loans
You can deduct the interest you pay during the year on qualifying student loans. Qualifying student loans are those that you took out to pay for higher education expenses for yourself, your spouse or your dependent. The proceeds of the loans must be used to pay for the education costs within a “reasonable” period of time after you took out the loan. You can include interest paid on refinanced or consolidated student loans, but you can’t count loans that were taken from a related person or an employer plan.
Qualified education expenses for the purposes of the student loan tax deduction include tuition, fees, room and board, books, supplies and equipment. But room and board can’t exceed the amount included in the school’s cost of attendance or, if larger, the amount charged to live in campus housing.
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Deduction Limitations
The maximum student loan interest deduction is $2,500 per year, whether you’re single or married filing jointly. Plus, if your modified adjusted gross income exceeds the annual limits, you’re not eligible for the full deduction.
Here are the deduction limitations for single and joint filers:
Single Filers
– Full deduction if your MAGI is $70,000 or less
– Partial deduction if your MAGI is between $70,000 and $85,000
– No deduction if your MAGI is $85,000 or more
Joint Filers
– Full deduction if your MAGI is $140,000 or less
– Partial deduction if your MAGI is between $140,000 and $170,000
– No deduction if your MAGI is $170,000 or more
You can’t claim the deduction if your status is married filing separately, regardless of your income.
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Claiming the Deduction
If you paid more than $600 in student loan interest during any year, you’ll receive a Form 1098-E documenting the amount you paid. If you qualify for the deduction, you can claim it even if you don’t itemize your deductions and claim the standard tax deduction. And, you can file your taxes with Form 1040.
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