If you are attending college and have received a student loan, then you have probably received a government form called a 1098-E from your lender. The government allows college students to claim student loan interest as a tax deduction. The 1098-E form is relatively easy to pull information from. Your loan servicer will have it filled out and sent to you, and you can take the total amount of interest paid and add that in the appropriate place when filing your taxes. It is a half-page document that is not nearly as intimidating as other tax forms.
While you can claim your student loan interest as a tax deduction, please be aware that there are some limitations. For example, the maximum amount of interest you can claim as a tax deduction is $2,500. Also, you must have paid at least $600 in loan interest during the fiscal year. Your income can also play a part in how much you can deduct. There are numerous “phase-out” charts online that can help you understand your specific situation. Students who are married and file jointly will have a different phase-out range than single students. If you are unsure of how much loan interest you can claim, you should contact the IRS.
Some other helpful hints for claiming student loan interest as a tax deduction include:
- Origination fees and other fees paid up front can be deducted over the lifespan of the loan.
- Certain loans do not qualify for a tax deduction, including loans taken from a 401K or loans from one family member to another.
- Students who are married but file separate taxes cannot have their loan interest deducted.
- A parent of a dependent can only claim a tax deduction on the student’s loan if they are directly responsible for that loan (i.e. a PLUS graduate loan).
There are numerous resources available to you for help with filing your taxes. An IRS representative or their website is always a great place to start. If you prefer to have a professional tax company file your taxes for you, they will also be able to answer your questions.
By Ryan Laspina
Senior Specialist, Red Flags and External Reviews at APUS