PSA: Don’t Forget to Subtract Interest on Student Loan
The first year I started paying off my student loan, I had no idea that interest was deductible . I missed out and hit myself for this years later. Don’t make the same mistake .
Your finances are probably already tight when you pay off your student loan, so you need to make sure you use every break you can. If you are going to compile taxes yourself, make sure you know your deductions. If your income does not exceed the set limit, it means that you can deduct the interest paid on the student loan.
Credit.com explains:
The IRS allows you to claim a student loan interest tax deduction on Form 1040, line 33. Because this counts as an “excess” deduction (ie, an adjustment to your income), you do not need to list your taxes to claim it.
Keep in mind that this is a deduction, not a loan. This means the deduction will reduce your taxable income to $ 2,500. In terms of actual dollars saved, your total tax bill could be reduced to $ 625, depending on your income and how much interest you pay on your student loan.
There are several selection rules ( this tool from the IRS will help you determine if you qualify), but this deduction applies to most student loans. If you were a certified student and the loan is indeed a certified student loan, you can claim interest as long as your Modified Adjusted Gross Income does not exceed $ 160,000 if you are registered jointly, or $ 80,000 if you are single … For more details, including specific guidelines, navigate to Credit.com’s full publication at the link below.
Here’s How Your Student Loans Can Give You Tax Credit | Credit.com