{"id":2001,"date":"2019-03-05T13:13:07","date_gmt":"2019-03-05T13:13:07","guid":{"rendered":"https:\/\/www.irstaxapp.com\/?p=2001"},"modified":"2019-09-12T06:56:47","modified_gmt":"2019-09-12T06:56:47","slug":"student-loan-interest-tax-deduction-simplified","status":"publish","type":"post","link":"https:\/\/www.irstaxapp.com\/student-loan-interest-tax-deduction-simplified\/","title":{"rendered":"Student Loan Tax Deduction Simplified"},"content":{"rendered":"\n<figure class=\"wp-block-image\"><picture><source srcset=\"https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2019\/03\/Student-Loan-Interest-Tax-Deduction-600x333.webp 600w,https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2019\/03\/Student-Loan-Interest-Tax-Deduction-300x167.webp 300w,https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2019\/03\/Student-Loan-Interest-Tax-Deduction.webp 810w\" sizes=\"(max-width: 810px) 100vw, 810px\" type=\"image\/webp\"><img src=\"https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2019\/03\/Student-Loan-Interest-Tax-Deduction.png\" height=\"450\" width=\"810\" srcset=\"https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2019\/03\/Student-Loan-Interest-Tax-Deduction-600x333.png 600w, https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2019\/03\/Student-Loan-Interest-Tax-Deduction-300x167.png 300w, https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2019\/03\/Student-Loan-Interest-Tax-Deduction.png 810w\" sizes=\"(max-width: 810px) 100vw, 810px\" class=\"wp-image-2010 sp-no-webp\" alt=\"STUDENT LOAN TAX DEDUCTION\" decoding=\"async\" loading=\"lazy\"  > <\/picture><\/figure>\n\n\n\n<p><a href=\"https:\/\/www.law.cornell.edu\/uscode\/text\/26\/221\" target=\"_blank\" rel=\"noopener\">Section 221 of Internal Revenue Code<\/a> deals with <em>tax deduction on student loan interest<\/em> to a taxpayer if certain conditions set therein are satisfied.  If you made federal student loan payments in 2018, you may be eligible to deduct a portion of the interest paid on your 2018 federal tax return. This is known as a student loan interest deduction. Please note <a href=\"https:\/\/www.irstaxapp.com\/tax-exemptions-tax-deductions-tax-credit-different\/\">tax deduction is not same as tax credit.<\/a>\u00a0 The present post is an attempt to answer five most important questions associated with the student loan interest deduction under 26 US Code.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_62 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-662731e1b52e9\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-662731e1b52e9\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.irstaxapp.com\/student-loan-interest-tax-deduction-simplified\/#1_What_type_of_loan_interest_you_can_deduct\" title=\"1. What type of loan interest you can deduct ?\">1. What type of loan interest you can deduct ?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.irstaxapp.com\/student-loan-interest-tax-deduction-simplified\/#2_Who_is_an_eligible_student\" title=\"2. Who is an eligible student?\">2. Who is an eligible student?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.irstaxapp.com\/student-loan-interest-tax-deduction-simplified\/#3_What_are_the_basic_conditions_to_claim_the_student_loan_tax_deduction\" title=\"3. What are the basic conditions to claim the student loan tax deduction?\">3. What are the basic conditions to claim the student loan tax deduction?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.irstaxapp.com\/student-loan-interest-tax-deduction-simplified\/#4_What_expenses_you_must_have_paid_with_the_student_loan\" title=\"4. What expenses you must have paid with the student loan\">4. What expenses you must have paid with the student loan<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.irstaxapp.com\/student-loan-interest-tax-deduction-simplified\/#5_How_to_figure_out_the_tax_deduction_for_education_loan\" title=\"5. How to figure out the tax deduction for education loan ?\">5. How to figure out the tax deduction for education loan ?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.irstaxapp.com\/student-loan-interest-tax-deduction-simplified\/#6_How_much_deduction_Student_Loan_Interest_Deduction_Phase-Outs\" title=\"6. How much deduction Student Loan Interest Deduction Phase-Outs \">6. How much deduction Student Loan Interest Deduction Phase-Outs <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.irstaxapp.com\/student-loan-interest-tax-deduction-simplified\/#7How_to_claim_the_educational_loan_interest_deduction_in_your_tax_return\" title=\"7.How to claim the educational loan interest deduction in your tax return?\">7.How to claim the educational loan interest deduction in your tax return?<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1_What_type_of_loan_interest_you_can_deduct\"><\/span>1. What type of loan interest you can deduct ?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Not all kinds of loan will qualify for the educational loan on which interest is deductible.  The loan must be a qualified student loan for the benefit of you, your spouse, or your dependent. Loans from a qualified employer plan don&#8217;t count, nor do private loans from family or friends The common question, therefore, is &#8220;what type of educational loans for students are qualified for tax deduction ?&#8221; .   The answer is that loan has to be what is called  <strong><em>&#8220;qualified student loan&#8221;<\/em><\/strong>which is  a loan you took out solely to <strong>pay qualified higher-education expenses<\/strong> that were: <\/p>\n\n\n\n<ul><li>For you, your spouse, or a person who was your dependent when you took out the loan;<\/li><li>For education provided during an academic period for an eligible student; and<\/li><li>Paid or incurred within a reasonable period of time before or after you took out the loan.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2_Who_is_an_eligible_student\"><\/span>2. Who is an eligible student?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p> Section 25A(b)(3).   of 26 US Code defines Eligible Student. The meaning of eligible student is borrowed from section 484(a)(1) of the Higher Education Act of 1965. In simpler terms, in my understanding, <\/p>\n\n\n\n<ul><li><em>An eligible student is one who is  enrolled or accepted for enrollment in a degree, certificate, or other program leading to a recognized educational credential at an institution of higher education that is an eligible institution ; and <\/em><\/li><li><em>is carrying at least \u00bd the normal full-time work load for the course of study the student is pursuing. <\/em><\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"3_What_are_the_basic_conditions_to_claim_the_student_loan_tax_deduction\"><\/span>3. What are the basic conditions to claim the student loan tax deduction?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>You can claim a deduction of interest paid on an educational loan if all of the following conditions are satisfied <\/p>\n\n\n\n<ol><li>You paid the interest on a qualified student loan ;<\/li><li>You&#8217;re legally obligated to pay educational loan interest. This means that you <strong><em>and\/or<\/em><\/strong> your spouse are the signatories on the educational loan if you file a joint return.  I<strong>f your child takes out the loan<\/strong> in his own name and is legally obliged to pay the loan, you can&#8217;t claim the interest deduction even if it is you who make the payments for him. \u00a0 <\/li><li> You must use the single, head of household, qualifying widow(er), or married filing jointly filing status to claim it. You can&#8217;t claim the student loan interest deduction if you file a separate married return. <\/li><li>Your Modified Adjusted Gross Income (MAGI ) is below or equal to the maximum allowed to be deducted  annually; and<\/li><li>You or your spouse, if filing jointly, are not claimed as dependents on someone else&#8217;s return.<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"4_What_expenses_you_must_have_paid_with_the_student_loan\"><\/span>4. What expenses you must have paid with the student loan<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Following expense are eligible for the use of student loan .<\/p>\n\n\n\n<ul><li> Tuition and fees  including costs for rental or purchase of any equipment, materials<\/li><li> Cost of books, supplies, transportation, and miscellaneous personal expenses, including a reasonable allowance for the documented rental or purchase of a personal computer<\/li><li>costs as determined by the institution for room and board costs incurred by the student .<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"5_How_to_figure_out_the_tax_deduction_for_education_loan\"><\/span>5. How to figure out the tax deduction for education loan ?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Form <strong>1098e<\/strong> is the<em> student loan tax deduction form<\/em> that is crucial for your claim of interest deduction. You will receive the  <em>Student Loan Interest Statement <\/em>or\u00a0  <a href=\"https:\/\/www.irs.gov\/pub\/irs-pdf\/f1098e.pdf\" target=\"_blank\" rel=\"noopener\"> Form <strong>1098-E<\/strong><\/a><strong> <\/strong>sometime after the first of the year from your educational loan lender only if  you paid $600 or more in interest to a federal loan servicer during the tax year . If your payment was less than $600 in interest to your federal loan servicer, you can contact each servicer as necessary to find out the exact amount of interest you paid during the year.  Box 1 of <em>this<\/em> <em>form<\/em> will show the interest paid by you during the year under consideration.  Use this data for working out the worksheet found in Publication 970 to calculate the deductible portion of your student loan interest.\u00a0\u00a0 <\/p>\n\n\n\n<p>Use this<strong> <\/strong><a href=\"https:\/\/www.irstaxapp.com\/educational-loan-interest-deduction-calculator\/\"><strong>educational loan  interest deduction calculator<\/strong><\/a> for knowing how many deductions you can claim for interest on an educational loan.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"6_How_much_deduction_Student_Loan_Interest_Deduction_Phase-Outs\"><\/span>6. How much deduction Student Loan Interest Deduction Phase-Outs <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The maximum student loan interest deduction is fixed at $2500 or the amount if interest paid by you during the tax year whichever is less. However, there\u2019s also a deduction phaseout that can limit the maximum deduction you can claim if your earnings fall within a specified range the aforesaid amount  The  phaseout for student loan interest ranges for the 2018 tax year are as under : <\/p>\n\n\n\n<table class=\"wp-block-table is-style-stripes\"><tbody><tr><td><strong>Filing Status<\/strong><\/td><td><strong>Phase-out Begins&nbsp;<\/strong><\/td><td><strong>Phase-out Ends<\/strong><\/td><\/tr><tr><td>Married Filing Jointly<\/td><td>135,000<\/td><td>165,000<\/td><\/tr><tr><td>Qualifying Widow(er)<\/td><td>65,000<\/td><td>80,000<\/td><\/tr><tr><td>Head of Household<\/td><td>65,000<\/td><td>80,000<\/td><\/tr><tr><td>Single<\/td><td>65,000<\/td><td>80,000<\/td><\/tr><\/tbody><\/table>\n\n\n\n<p>Your limit is prorated if your MAGI falls within the phase-out range. The IRS explains how to calculate the reduced student loan interest deduction in Chapter 4 of&nbsp;<a href=\"http:\/\/www.irs.gov\/publications\/p970\" target=\"_blank\" rel=\"noreferrer noopener\">Publication 970<\/a>:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote\"><p><br>&#8220;If your MAGI is within the range of incomes where the credit must be reduced, you must figure your reduced deduction. To figure the phase-out, multiply your interest deduction (before the phase-out, but not more than $2,500) by a fraction. The numerator is your MAGI minus $65,000 ($130,000 in the case of a joint return). The denominator is $15,000 ($30,000 in the case of a joint return). Subtract the result from your deduction (before the phase-out) to give you the amount you can deduct.&#8221;&nbsp;<\/p><\/blockquote>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"7How_to_claim_the_educational_loan_interest_deduction_in_your_tax_return\"><\/span>7.How to claim the educational loan interest deduction in your tax return?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>You need to fill the deduction in point 33 under Adjustment to Income in the Schedule 1 of the one-page tax form 1040 .<\/p>\n\n\n\n<p>Hope the aforesaid answer clarifies most of your doubts on the legality of <em><strong>Student Loan Tax Deduction <\/strong><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Section 221 of Internal Revenue Code deals with tax deduction on student loan interest to a taxpayer if certain conditions set therein are satisfied. If you made federal student loan payments in 2018, you may be eligible to deduct a portion of the interest paid on your 2018 federal tax return. This is known as [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":2010,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[9],"tags":[983,982,1024],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/posts\/2001"}],"collection":[{"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/comments?post=2001"}],"version-history":[{"count":0,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/posts\/2001\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/media\/2010"}],"wp:attachment":[{"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/media?parent=2001"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/categories?post=2001"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/tags?post=2001"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}