Did you know that you can deduct up to twenty five hundred dollars from your student loans interest, There are some rules to this however. Your loan is only eligible for the deduction if you took out the loan only for a higher education program that’s qualified by law. This can be not only for yourself, but your dependents and spouse as well.
The money for the loan must have been spent on expenses for college or vocational studies such as your tuition, textbooks, school supplies, any administrative fees, any type of equipment, your room and board, and transportation to and from school.
The student must be in a qualified degree program, and they must be a half-time student at least. As well, you’ll be obligated by law to repay the loan.
If someone else claims an exemption for the student, if you’re not allowed by law to get the loan, if the loan was obtained by a relative, or if the student is married to the receiver of the loan, but they are filing a separate return.
There are some limitations on what can be deducted and it’s best that you obtain all of that information ahead of time in order to save yourself from breaking any of the rules, ensuring that you get the most of your deduction.
As well, it’s important that the student is managing money efficiently. If debt is a major problem before going into the loan, then you may want to consolidate debt with a specific loan or program to do so. This will lower your monthly payments, and therefore lessen the burden on you in making your student loan payments.
Keep in mind that if you are paying your student loans after 2002, the “first 60 months” requirement on interest paid is discontinued, and deductions are permissible for voluntary interest payments, rather than only required payments as in the previous years. Also you take the deduction on either Form 1040 or Form 1040A.
It is a great benefit, and should be availed by all families, especially those families whose children aspire for higher education but cannot find sufficient funding. A tax deduction like this can help their parents cover a part of their requirements.