Student loan holders, check your emails and your mail boxes! A form might be coming your way that could save you some money!
Student Loan Interest = Tax Deduction?
Student loan interest, in some cases, is tax deductible. As we head into tax season, some student loan providers will be giving online access to a 1098-E form so that you can claim your student loan interest as a deduction. You can claim up to $2500 if you are eligible! As always, however, there are some requirements that must be met first.
What are the Requirements?
According to the IRS, “you may be able to deduct interest you pay on a qualified student loan. Generally, the amount you may deduct is the lesser of $2,500 or the amount of interest you actually paid.”
If all of the following apply to your situation, you can claim the deduction on your taxes:
- If you are legally required to pay interest on an approved student loan
- If you then paid a minimum of $600 of interest on a student loan within the year 2015 (or the tax year in question)
- If you are filing your taxes as single or joint/married, but not married filing separately
- If you make less per year than a specific amount which is set by the IRS
- If you cannot be claimed as dependent on someone else’s taxes.
If all of these apply to your situation, then you should have no trouble filing a deduction for your student loan interest. Any payment towards student loan interest made before December 31, 2015 (through certain loan providers) is eligible as a deduction this spring.
How Does It Work?
When you file your taxes, the federal government will see your paperwork and say, “You made (insert amount here) this year.”
You will then be able to come back with a rebuttal in the form of your deduction and say, “No, I didn’t take home that much, because (insert amount here) went to my student loans.” They will then decide whether or not you have a lower taxable income, based on how much of your money went to paying your loan interest.
Contact your loan provider, or use their online calculators to figure out your interest for the year, or log into your online student loan management account to see if they have provided you with a 1098-e form. Keep it handy so that you have it when it comes time to file your taxes.
Anything I Should Keep In Mind?
One thing I cannot stress enough, don’t change your repayment schedule. While there is a good chance that if you meet all the requirements, you will receive a larger tax return and a bigger tax break, you are not guaranteed either of those things and the possibility shouldn’t play a large factor in your payoff plan.
Here’s to hoping for savings!
About the author
Trinya’s passion for helping others understand student loans started when she began learning all she could to fill in what she didn’t know about her own loans. She enjoys speaking at local schools about the cost of college and assisting friends with their finances. In her free time, Trinya also enjoys reading, writing, and playing music.