Strapped for cash as a recent grad? See if you qualify for a student loan interest deduction.
College is over and you’ve been blasted with a taste of reality…or should I say adulthood? It’s tough but you’ll get through it. Even the IRS is on your side with certain deductions available to those of us who used our after-high school lives to pick up a college education. College is expensive. The student loan interest deduction can help you out a bit. Let’s see if you’re eligible.
Are there income limits?
Here are the income limits that apply to the student loan interest deduction. Note that prior tax years have slightly different income limits:
Single filers with a modified adjusted gross income (MAGI) below $80,000 and married couples filing jointly with incomes below $160,000 can take the full deduction.
Taxpayers whose MAGIs are above these limits can only take a reduced deduction or no deduction at all. The deduction phases out between MAGIs of $65,000 and $80,000 for single filers. For married couples filing jointly, the deduction phases out between MAGIs of $130,000 and $160,000.
Taxpayers with a MAGI that falls above the threshold income limit cannot take the deduction at all.
How can I claim the deduction?
If your income falls below the phase out levels, you can deduct up to $2,500 of the interest you paid on student loans. Your lenders should send you a Form 1098-E: Student Loan Interest Statement letting you know how much interest you can claim on your tax return. Keep in mind that they are not required to send you a 1098-E for less than $600 in interest accumulated. You can then claim the total amount from all of your 1098-E forms up to $2,500.
What if I claim the standard deduction?
The good news is that the student loan interest deduction is an above-the-line deduction. This means that anyone can take it; whether you itemize deductions or claim the standard deduction.
Who can claim the deduction for the student?
For those who don’t know, the student loan interest deduction allows you to deduct the interest you paid on student loans. You can take the deduction if you paid interest on a student loan for:
- your spouse, or
- your dependent
However, the deduction does not apply to loans by family members to students. What does this mean? If you try to claim a deduction for the interest you’re paying to mom and dad, the IRS isn’t going to buy it.
Let’s get going.
Being a full-fledged adult is complicated. The only way to survive is diving in head-first. We can help eliminate the stress of filing your taxes. You can use PriorTax to get your taxes filed and hopefully even claim that student loan interest deduction.