Are Student Loans Tax Deductible?

Student loans provide many people with the opportunity to go to college. On the flip side, though, they also saddle people with debt, sometimes for a lifetime. The good news is that you can enjoy at least a little relief if you know how to get it.   

For starters, if you have a loan that you took out only for college, and you are making payments on that loan, you can usually deduct the interest on that loan. The deduction is limited though, only up to $2,500 or the amount of interest that you paid, whichever one is less.

Also, bear in mind that there are some limits in place. In order to qualify for the deduction, you have to meet the following criteria:

l  You’ve paid interest on a qualified student loan during the tax year

l  You are a single filer or a married filing jointly filer with an income below $65,000 or $135,000 if married

l  You are legally required to pay for your loan and its interest

l  You are not claimed as a dependent on anyone else’s return

l  You are not filing as married filing separately

If you qualify, you’ll also be glad to know that you don’t have to itemize deductions in order to get the deduction.

Also, bear in mind that your lender should send you a 1098E form, which shows how much interest you paid. This form should come to you automatically if you paid over $600 to the lender. If you don’t get it for whatever reason, contact the lender directly to get it.

If you have questions about whether or not you are entitled to this deduction or how to ensure you take full advantage of it, remember that your best bet is always to turn to a professional accountant.