Are my student loans tax deductible?

If you are currently in college and/or are a recent graduate odds are you are stuck with the burden of repaying student loans. And you may be wondering – are my student loans tax deductible?

Indeed we know how difficult it can be to make student loan payments on an entry level salary. However there is a benefit at tax time to making regular payments towards your student loans throughout the year. The benefit being, that provided you meet several requirements, the interest paid on a student loan is typically tax deductible.

Student loan interest is tax deductible if:

• You student loan qualifies. A loan qualifies if the funds are used for school tuition or other expenses closely related to your schooling.
• It’s your personal loan. This means that only you signed up for the loan and are the only person responsible for paying it back. So if a family member or relative initiated the loan on your behalf, you cannot deduct the interest.
• Your are not in a marriage and filing separate tax returns.
• Your modified adjusted gross income is less that $80,000 or $160,000 all together if filing with your spouse.

However, there is a limit as to the amount of student loan interest that is deductible from your taxes. In fact IRS law states that you may deduct a no more than $2,500 (given you paid at least this amount in interest) per year from your taxes. Additionally the interest must have been paid in the tax year in which you are filling. So any interest paid after December 31, 2016 cannot be claimed for the 2016 tax year.

If you paid interest towards a student loan for the 2106 tax year, your loan provider should have sent you a 1098-E by the end of January.  Contact your lending service immediately if you did not yet receive you 1098-E.

If you have any questions about making deductions for student loans on your tax return contact one of our certified tax professionals today.