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Deduct Student Loan Interest Overview

November 16, 2011

Deduct Student Loan Interest

Deduct Student Loan Interest

If you are looking to deduct student loan interest, the first thing that you want to note is that you must fill out either a 1040 or 1040A From, where the student loan interst deduction section is the section called “adjustments to income”, or line 18 on the 1040A and line 33 on the 1040 Form.  To figure out how much interest that you paid on your student loans throughout the year, you will need a Form-1098 E which you can get by requesting one from the lender of your school loans, in which you will fill out Box 1 if in fact they did not send it to you, which is the case most of the time.

This form allow an individual to claim up to $2,500 in interest paid on student loans as you tax deduction. This student loan interest deduction rule currently applies to every person that is paying student loan debt to lenders, but as of the beginning of 2013, individuals with student loan debt will only be able to use student loan interested deduction during the first 5 years of repayment, which after this 60 month timeframe is over, one cannot file for student loan interest rate deduction anymore.

Deduct Student Loan Interest Rule

The above is a general overview of how to deduct student loan interest as well as what it can do for those who have compiled student loan debt. There are other certain rules and restrictions that apply, depending on what you annual income is. Below are the following rules for incomes:

  • If you are earning above 75,000 dollars per year, you can not use student loan interested deduction.
  • For those earning anywhere between $60,000 to $75,000 per year, then the interested that you have on your student loans will be what is called “prorated” which is where you will be partially eligbile to deduct student loan interest.
  • If you earn any amount less that $60,000 per year, than you are eligible to deduct interest amounts as high as $2,500. It is important to not file for any amount higher than $2,500.

If you happen to be a couple that is filing for student loan interest deduction, the same rules apply above where you will just add up the amount of income that the each one earns. For example say the couples income totals up to 130,000 per year, then they will be able to use the second option above. It should also be noted that you do not have to be the user of the loan funds to file, as you can file to deduct student loan interest for a spouse in the case that you are doing a joint deduction, or a dependent and of course yourself.

NOTE: You can also deduct student loan interest if you have either other itemized deductions or have not used any itemized deductions at all. If you are not sure what an itemized deduction is, they are essentially expenses that a US taxpayer can report when filling out their tax returns which allow a decrease in the persons taxible income.