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Student Loan Interest

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Question
Student Loan Interest

Answer

You may take this deduction only if all four of the following apply.

  1. You paid interest in the tax year on a qualified student loan (see below).
  2. Your filing status is any status except married filing separately.
  3. Your modified adjusted gross income (AGI) is less than: $75,000 if single, head of household, or qualifying widow(er); $150,000 if married filing jointly.
  4. You are not claimed as a dependent on someone's (such as your parent's) tax return.

If you meet the above requirements and enter student loan interest, we will figure the credit for you. Please note that there is a phase-out of this credit based on your Modified AGI.

Use Pub. 970 instead of the worksheet below to figure your student loan interest deduction if you file Form 2555, 2555-EZ, or 4563, or you include income from sources within Puerto Rico.

Qualified Student Loan 
A qualified student loan is any loan you took out to pay the qualified higher education expenses for any of the following individuals:

  • Yourself or your spouse
  • Any person who was your dependent when the loan was taken out
  • Any person you could have claimed as a dependant for the year the loan was taken out except that
    - the person filed a joint return
    - the person had gross income that was equal to or more than the exemption amount for that year ($3,650 for 2009)
    - you, or your spouse if filing jointly could be claimed as a dependent on someone else's return

The person for whom the eligible expenses were paid must have been an eligible student (see this page). However, a loan is not a qualified student loan if a) any of the proceeds were used for other purposes, or b) the loan was from either a related person or a person who borrowed theproceeds under a qualified employer plan or a contract purchased under such a plan. To find out who is a related person, see Pub. 970.

Qualified Higher Education Expenses
Qualified higer education expenses generally include tuition, fees, room and board, and related expenses such as books and supplies. The expenses must be for education in a degree, certificate, or similar program at an eligible educational institution. an eligible educational institution includes most colleges, universities, and certain vocational schools. You must reduce the expenses by the following benefits:

  • Employer-provided educational assistance benefits that are not included in Box 1 of Form(s) W-2.
  • Excludable US series EE and I savings bond interest from Form 8815.
  • Any nontaxable distribution of qualified tuition program earnings
  • Any nontaxable distribution of Coverdell education savings account earnings
  • Any scholarship, educational assistance allowance, or other payment (but not gifts, inheritances, etc.) excluded from income.

For more details on these expenses, see Pub. 970.

Eligible Student
An eligible student is a person who:

  • Was enrolled in a degree, certificate, or other program (including a program of study abroad that was approved for credit by the institution at which the student was enrolled) leading to a recognized educational credential at an eligible educational institution, and
  • Carried at least half the normal full-time workload for the course of study he or she was pursuing.

 


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Views: 461 Created on: Jun 15, 2013
Date updated: Nov 10, 2014

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