If you started repayments, you could be eligible for a tax deduction up to $2,500

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STATEN ISLAND, N.Y. — Student loan borrowers began making repayments last year after a freeze ended — but you may be eligible for a tax deduction.

Interest on federal student loans began to accrue again on Sept. 1, with the first payments due in October for millions of Americans. So if you started repaying, you may be able to take a federal tax deduction on the interest.

This benefit applies to all loans — not just federal student loans — used to pay for higher education expenses up to $2,500 a year.

Generally, personal interest you pay, other than certain mortgage interest, isn’t deductible on your tax return, according to the federal government. This interest on student loans is an exception.

For 2023, the amount of your student loan interest deduction is gradually reduced if your modified adjusted gross income is between $75,000 and $95,000 for single filers — or $155,000 and $185,000 if you file a joint return.

You can’t claim this deduction if your gross income is $90,000 or more for single filers, or $185,000 or more if you file a joint return.

The student loan interest deduction is claimed as an adjustment to income. This means you can claim this deduction even if you don’t itemize deductions on Schedule A (Form 1040).

To qualify, your student loan must have been taken out solely to pay qualified education expenses, and can’t be from a related person or made under a qualified employer plan.

For purposes of the student loan interest deduction, these expenses are the total costs of attending an eligible educational institution. They include amounts paid for tuition and fees, room and board, books, supplies and equipment; and other necessary expenses like transportation.

There is also a reminder to tax filers that you can’t deduct as interest on a student loan any interest paid by your employer after March 27, 2000, and before Jan. 1, 2026, under an educational assistance program.

You can’t claim a student loan interest deduction for any of the following items.

  • Interest you paid on a loan if, under the terms of the loan, you aren’t legally obligated to make interest payments.
  • Loan origination fees that are payments for property or services provided by the lender, such as commitment fees or processing costs.
  • Interest you paid on a loan to the extent payments were made through your participation in the National Health Service Corps Loan Repayment Program (the NHSC Loan Repayment Program) or certain other loan repayment assistance programs.

The deadline to file a tax return is Monday, April 15.

Read more at IRS.gov.

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Read More: If you started repayments, you could be eligible for a tax deduction up to $2,500

2024-04-14 13:31:00

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