The student loan interest tax deduction is a tax break available to taxpayers who paid interest on student loans during the year. It can be beneficial for people who are already paying off their student loans or just starting out and want to take advantage of this credit. However, there are some limitations on who qualifies for this deduction:
Deduction For Student Loan Interest
1 This is a tax deduction which allows taxpayers who paid interest on student loans to deduct the amount from their taxable income.
The student loan interest tax deduction is a valuable tax break that allows taxpayers who paid interest on student loans to deduct the amount from their taxable income. The purpose of this deduction is to help offset the costs associated with paying back educational debts acquired while attending college or trade school, as well as technical training programs.
You can claim this deduction if you are an individual (or married couple filing jointly) and meet one of the following requirements:
- You paid qualified education expenses for yourself, your spouse or a dependent for whom you claim an exemption on your federal income tax return.
- You were a candidate for a degree at an eligible educational institution for any academic period beginning in 2015 and ending after April 1, 2017; OR incurred student loan interest during 2015 or 2016 that you paid during 2017; OR had no outstanding balance on your qualified student loans as of Jan 1, 2017; AND made progress paying down those loans during 2017
2 In order to qualify for this deduction, the taxpayer must be legally obligated to make payments on the loan, owe the debt in the tax year, and not be claimed as a dependent on someone else’s tax return.
In order to qualify for this deduction, the taxpayer must be legally obligated to make payments on the loan, owe the debt in the tax year, and not be claimed as a dependent on someone else’s tax return. In addition, you can’t claim this deduction if you’re married filing separately.
3 It can be beneficial to file married filing jointly with your spouse if they are not eligible for the credit because this will give you a larger deduction.
- If you are married and file jointly, you can claim the student loan interest deduction if your spouse is not eligible for the deduction.
- If you are single and file a separate return, then you may be able to claim this deduction even if your spouse does not have income.
- In some cases, even if both spouses are eligible for the student loan interest credit or deduction (for example if they are filing separately), it can still benefit them to file as married filing jointly because this will give them a larger credit or deduction than what they would get otherwise.
4 If you only have W2s and you’re paying off student loans, taking the standard deduction (or itemized deduction) is going to be better than taking this deduction.
If you have a lot of student loan interest to deduct, you may be better off itemizing your deductions.
If you have several other deductions and credits available, it may make more sense to claim those instead of taking the standard deduction. For instance, if you pay property taxes or medical expenses in excess of 10% of your income, then it might be worth claiming them on Schedule A before deciding whether or not to take this deduction.
Student loan interest is tax-deductible up to $2,500 per year; however the law allows taxpayers who file as single or head-of-household a chance at that amount for both 2017 and 2018 returns (see below).
5 The student loan interest tax deduction lets you claim your interest payments as an above-the-line exclusion from income.
The student loan interest tax deduction lets you claim your interest payments as an above-the-line exclusion from income. This means that you can reduce your taxable income by the amount of interest you pay on your student loans.
Unlike other tax breaks, this one comes with some flexibility: it doesn’t have a 2% of adjusted gross income floor or an itemized deduction floor for people who choose to take it on Schedule A (Form 1040).
In summary, if you are paying off student loans, you may be able to deduct the interest from your income. This is a great way to save money on taxes and can help reduce your overall tax burden. The Student Loan Interest Deduction is an “Above-the-line” deduction; it reduces taxable income without itemizing.