You may have heard that student loan interest payments are tax deductible, but you might be wondering if it’s worth going through the trouble of filing an amended return. It is! Just follow the steps below to see how to file for a deduction on your 2017 tax return.
Student Loan For Tax Returns
Student loan interest payments are tax deductible.
If you paid off your student loans, you might be able to deduct the interest. The Internal Revenue Service offers a deduction for taxpayers who pay interest on educational loans. However, this deduction isn’t automatic. You have to itemize your deductions and prove that the money was used for education-related expenses before claiming it as an expense on Schedule A of Form 1040.
According to the IRS website, “You can deduct up to $2,500 of student loan interest each year.” You’ll need things like canceled checks or receipts for any payments made during the year and a completed Form 1098-E from each lender (or other documentation showing what you paid).
You can deduct up to $2,500 of student loan interest a year.
The IRS allows you to deduct up to $2,500 in student loan interest, which is the same limit for all other types of interest. The deduction applies to any student loan debt that was incurred during the tax year and paid on or before December 31st.
The limit is per tax return—you can’t double dip by claiming it on your parent’s return if you’re a dependent student. Also keep in mind that this benefit only applies if your total income for the year is less than $80,000 for single filers and $160,000 for joint filers.
You won’t benefit if you take the standard deduction.
If you take the standard deduction, you’re not going to benefit from claiming student loan interest. In 2019, the standard deduction is $12,000 for single filers and $24,000 for joint filers. If you don’t itemize your deductions—say, because your total deductions are lower than these amounts—you won’t be able to deduct any student loan interest at all.
The good news? You can still deduct up to $2,500 in student loan interest if your spouse or partner has their own qualifying student loan debt!
You must be legally responsible for paying back the loan.
In order to qualify for student loan forgiveness, the student must be legally responsible for paying back their loans. This means that if you have cosigned a loan with someone else, then only the other party is legally responsible for repaying it. As such, neither you nor your co-signer will be eligible for forgiveness through the PSLF program.
However, if you signed a private loan without anyone else’s help or involvement and are now unable to repay it due to financial hardship then this may qualify as an unfortunate circumstance under which you can request relief from your lender or servicer. It should also be noted that even in cases where there has been no wrongdoing on behalf of either party involved in making these loans (i.e., neither party misrepresented their qualifications or intentions), lenders are still required by law to offer options such as repayment plans based on income level before initiating any type of collection activity against delinquent borrowers—a practice known as “deferment” or “forbearance.”
Your modified adjusted gross income must be less than $80,000 ($160,000 if filing jointly).
The modified adjusted gross income (MAGI) of your filing status must be less than $80,000 ($160,000 if filing jointly).
You can potentially lower your tax bill by deducting student loan interest.
You can potentially lower your tax bill by deducting student loan interest.
If you’re legally responsible for repaying a student loan, the IRS will let you deduct up to $2,500 of interest paid on it for the 2018 tax year. You must file as an individual or married filing jointly (MFJ) and modified adjusted gross income (MAGI) must also be less than $80,000 ($160,000 if MFJ).
Closing
You can deduct up to $2,500 of student loan interest a year. You won’t benefit if you take the standard deduction. You must be legally responsible for paying back the loan. Your modified adjusted gross income must be less than $80,000 ($160,000 if filing jointly).