After you have totaled your income, you are allowed to deduct
(subtract) certain amounts to arrive at adjusted gross income. For
example, you can deduct interest paid on a qualified student loan
(discussed next). You also are allowed to deduct certain amounts, such
as a standard deduction or itemized deductions (discussed later), to
figure your taxable income.
Deductible student loan interest.
You may be able to deduct interest you pay on your qualified
student loan. This applies to loan interest payments due and paid in
2000.
You may be able to deduct the interest even if you took out the
loan before 2000. Regardless of when you took out the loan, you can
deduct only interest paid during the first 60 months that
interest payments are required.
Example 1.
You took out a qualified student loan in 1993. You made payments
on the loan every month as required, beginning October 1, 1995. You
can deduct the interest of your first nine payments for 2000. You
cannot deduct the interest on any later payments because they are
after the 60-month period (October 1, 1995 -- September 30,
2000).
Maximum deduction.
Your deduction for 2000 cannot be more than $2,000. This limit
increases to $2,500 for 2001 and later years.
Limit on deduction.
Your deduction may be limited depending on your modified adjusted
gross income (AGI). See the Form 1040 Instructions and the
Student Loan Interest Deduction Worksheet for these limits.
Claiming the deduction.
This deduction is an adjustment to income, so you can claim it even
if you do not itemize your deductions on Schedule A (Form 1040). You
cannot claim the deduction if:
- Another taxpayer claims you as a dependent,
or
- Your filing status is married filing a separate
return.
You claim the deduction on line 24 of Form 1040 or line 17 of Form
1040A. See your form instructions for more information.
Use the Student Loan Interest Deduction Worksheet in the
form instructions to figure your deduction.
Change in dependency status.
You cannot deduct interest on a student loan for any year you are
claimed as a dependent on another person's return. But you can,
subject to other requirements, deduct payments made in a later year
when you are no longer claimed as a dependent.
Standard deduction.
Most people are entitled to deduct a certain amount called the
standard deduction from their income. This amount is set by law and
generally increases each year.
Dependent.
If your parent or someone else can claim you as a dependent, your
standard deduction is the greater of:
- $700 ($1,800 if blind), or
- Your earned income plus $250, but not more than $4,400
($5,500 if blind).
Earned income for this purpose is income you received as payment
for work you did, plus any part of a scholarship or fellowship grant
that you must include in income.
Not a dependent.
If no one can claim you as a dependent, you can subtract a standard
deduction of $4,400 ($5,500 if blind).
Itemized deductions.
You may have high medical bills, pay a lot of mortgage interest or
state and local income taxes, or contribute large amounts to charity.
If these expenses add up to more than the amount of the standard
deduction, the law allows you to claim the higher total instead of the
standard deduction. To do this, you must itemize (list) your
deductible expenses on Schedule A (Form 1040). As a student, you
probably do not have enough of these kinds of expenses to itemize, but
keep this in mind for future years when you do.
Exemptions.
Generally, you can subtract from income your own personal
exemption. This amount is $2,800 for 2000. It is set by law and
generally increases each year. However, if you can be claimed as a
dependent by your parents or others, you are not entitled to a
personal exemption.
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