Sure, those student loan payments are a pain. The student loan interest deduction is one way to ease the sting of student loan payments.
If you’re just starting out with student loan payments, you may not be aware of the potential tax benefits. The student loan interest deduction can reduce your taxable income by up to $2500.00. Here’s how it works:
You’ll receive a 1098-E form from your student loan servicer. If you’ve been making payment during 2015, they will have sent you this form no later than February.
Your student loan servicer will issue the 1098-E form if you paid $600.00 or more in interest during the tax year.
Box 1 on the 1098-E will indicate how much interest you’ve paid in 2015.
- If your modified adjusted gross income is $65,0000 or less, you’ll be able to claim the full deduction, even if you don’t itemize your other tax deductions, such as medical or business expenses.
- If your modified adjusted gross income falls between $65,000 and $80,000, the deduction will begin to phase out.
- Once your income reaches $80,000 or more, you will not be eligible for this deduction.
As long as the student loan is in your name, and as long as you meet the income requirements, you can claim the deduction even if someone else is making the payments for you.
Keep in mind that if you will be filing as a married person filing separately, you won’t be able to claim the deduction.
While this deduction won’t completely take the sting out of those dreaded student loan payments, you can get some relief at tax time by deducting your student loan interest on your tax returns.