Deductible Interest Payments on Student Loans?

If you’re making student loan payments for the first time this year, don’t forget that you may qualify for a tax deduction come April. If you do qualify, you may be able to take a significant deduction for the interest you’ve paid on your student loan debt. Next to low variable or fixed interest rates, this is one of the biggest benefits of a student loan over other types of loans you may have.

How do you know if you qualify? Be sure you receive a 1098-E form from your lender if you pay out more than $600 in interest. This is a statement detailing the amount of interest you’ve paid that you must have to claim the deduction. If you meet eligibility requirements for the deduction and your loans qualify, you may deduct up to $2500 in student loan interest as an adjustment to your income. If you want to know ahead of time how much interest you’ve paid, contact your lender or utilize a student loan calculator that can quickly give you full information about your payments.

There are several conditions you have to meet to qualify for the deduction. Two common reasons students are disqualified are for being claimed as a dependent by someone else, or because they were not legally obligated to make payments for the period during which the interest was paid.

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