Interest on a student loan is the interest paid during the year on a qualified student loan. Includes both interest required and voluntarily prepaid. You can deduct a smaller amount of USD 2,500 or the amount of interest paid during the year. Can I claim student loan interest on my taxes?
What is the student loan interest deduction?
The deduction of interest on student loans is a federal income tax deduction that allows you to deduct up to $ 2,500 of interest paid on eligible student loans from your taxable income. This is one of several tax breaks available for students and their parents to help pay for higher education.
Please note that interest on student loans from federal agencies was suspended indefinitely during the coronavirus crisis by President Trump on March 13, 2020. This does not affect private student loans, but this will mean that interest suspension may not be accrued. applicable.
Information you’ll need:
- Application Status
- Basic income information.
- Your adjusted gross income.
Expenditure on education financed from non-taxable funds.
The tool is intended for taxpayers who were US citizens or foreign residents throughout the tax year to which they refer. In the case of marriage, the spouse must also be a US citizen or a foreigner resident for the entire tax year. For information on non-residents or dual status foreigners, see International Taxpayers.
Who can deduct interest on a student loan?
With MAGI of less than USD 85,000, you can deduct interest on student loans if you repaid a federal or private student loan in 2019. The loans should be used for eligible education expenses and include:
Borrowings for own education. This deduction is not only for tax graduates: if you are a supervisor who pays student loans back at school, you can also use this deduction.
Loans borrowed for someone else’s education. If you took out a loan on your own behalf for someone else – for example, a parental loan PLUS for your child – you can benefit from a student loan interest deduction.
Loans that you have to pay back. Even if your wages are changed or if you are legally obliged to pay back the loan, you can still deduct any interest paid back.
You cannot apply for a student loan interest deduction if your application status is a separate marriage. You also do not qualify if you are listed as dependent on someone else’s tax return.
How to calculate your deduction?
You can use the spreadsheet on page 90 of the 2019 instructions for Form 1040 to find out both about MAGI and the deduction.
Just divide this number by $ 15,000 after calculating MAGI. Convert decimal to three decimal places. If there is more than 1,000, you will use 1,000 for the calculation. If it is less than 1,000, you will use it as it is.
Now multiply the interest paid on your student loan to $ 2,500 by a decimal fraction. The answer will be $ 2,500 or less.