Student Loan Interest Deduction
Normally interest you pay on personal loans (except mortgages) is not tax deductible on your income taxes. However, if your income is between $55,000 - $70,000 ($110,000 - $140,000 filing jointly) and you pay qualified interest on monies that were used exclusively to pay for qualified educational expenses, you could deduct part or all of this interest (up to $2,500 a year) on your income taxes.
Most individuals feel the only type of student loan interest that could be tax deductible is interest paid on federal student loans (Stafford, Perkins or PLUS). However, the IRS will let you deduct any loan interest that is used exclusively to pay for qualified educational expenses (with a few exceptions).
In order to deduct the interest on a student loan, the student must be a qualified student attending an eligible educational institution that is part of the student aid program administrated by the Federal Department of Education.
In order to qualify for the interest deduction you need to know how the IRS defines qualified educational expenses. You also need to know what other benefits the student receives that could reduce these qualified expenses.
Below Are A Few Other Things You Need To Know
- Can a dependent student deduct interest paid on their student loan?
- Can a parent deduct student loan interest if they pay interest on a Unsubsidized Stafford Loan for the student?
- Can you deduct interest paid on a credit card that is used to pay for qualified educational expenses?
- If a student borrows money to help pay for college expenses from their grandparents can they deduct the interest they pay to the grandparents on their taxes?
Knowing how to pay for college can keep the student and parents’ debt down to a minimum. Click Here to view a web cast and learn the dangers of borrowing.
