It’s high school graduation season, which means “off to college season” is right around the corner! If you are among the thousands of families turning to student loans to help cover higher education expenses, make sure you have all the facts about deducting student loan interest before next tax season rolls around!
What Is Student Loan Interest?
Student loans are just like any other kind of loan or line of credit: You receive money from a lender and then you have to pay it back over time. While you still have an outstanding balance, interest is charged on that amount. Subsidized loans suspend interest charges while you’re in school. Unsubsidized loans accrue interest from the time they’re disbursed.
Who Can Deduct Student Loan Interest?
The IRS will allow you to deduct student loan interest for qualified student loans. A “qualified student loan” is a loan you took out to pay for educational expenses for:
- Your spouse
- Someone who was your dependent when you took out the loan
The educational expenses must have been incurred within a reasonable period of time before or after you took out the loan; they must also be expenses for education provided to an eligible student.
How Much Student Loan Interest Can I Deduct?
You can deduct the lesser of $2,500 or the actual amount of interest accrued on qualified student loans during the tax year in question. You cannot, however, deduct student loan interest if you’re claimed as a dependent on someone else’s return or if your status is “married filing separately.”
You can keep up with the amount of interest charged via monthly statements from your student loan servicer. Your servicer will also provide you with an annual student loan interest statement (form 1098E) at the end of each year.
Where Can I Get More Help?
If you need assistance figuring out how to deduct student loan interest on your taxes, reach out to your local tax pros at Taxation Solutions, Inc. Call us today for help navigating student loan interest deductions and other education-related tax matters. We’re here to help you maximize your deductions so you can keep your educational plan moving forward!