Student Loan Interest – Low Rates and Tax Deductions
Student loan interest varies from year to year and term to term, but is almost always at a lower interest rate than other financial instruments a person could be using. Student loan interest will always be lower than the higher interest amounts charged by credit cards and will usually be lower than home mortgages and home equity lines of credit. Dollar for dollar student loans are a good financial value, and that is even more obvious when you look at the end result of a student loan – a college education, which is actually the best investment a person can make, an investment themselves and their own marketability in the job market, to say nothing of the intellectual satisfaction that comes from a quality education.
Student Loan Interest May Be A Valid Tax Deduction
Another benefit that many people are not aware of is the fact that student loan interest may be tax deductable. This can be true no matter what your income level according to information from the Internal Revenue Service. The deduction on student loan interest is claimed actually a change in your income, so itemizing this deduction is not necessary. Less hassle and more money, what could be better?
According to the IRS, you can take advantage of this if:
You paid any money in interest to a student loan that qualifies during the past tax year You don’t have a tax status of “Married Filing Separately” Your modified adjusted gross income is less than $70,000 or $145,000 (if you’ll be filing jointly). You can’t be claimed as a dependent on another tax return. A Qualified Student Loan Is One Taken Only to Pay Higher Education Expenses
It’s important to understand the definition of a qualified student loan. It has to be one you took to pay your higher education expenses. If in doubt please read the instructions for the 1040 or talk to a tax professional.
If you have to file a Form 2555, Form 2555EZ or Form 4563, then you’ll need to take a look at Publication 970 instead of the worksheet in the 1040 instructions so you can claim the deduction.
The deduction on student loan interest will start to phase out when if your AGI begins to get above those amounts. To discover when the deduction is phased out, the tax payer should refer to IRS Publication 970, called Tax Benefits for Education. If more than $600 was paid in student loan interest during a year then IRS Form 1098E, a pdf file should be read.