Education & Work-Related Expenses
This is archived information that pertains only to the 2002 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.
Can I take a deduction for the interest I paid on my student loan?
Starting in 1998, taxpayers who have taken out qualified loans to pay certain costs of attending an eligible educational institution for themselves, their spouse, or their dependent are allowed to take a deduction from gross income for the interest they paid on these student loans. Prior to 2002, deduction of student loan interest was limited to the first 60 months of required interest payments, and, was subject to income limitations. Beginning in 2002, interest paid over any period of time on a qualified education loan is deductible. There are also income limits. For more information, refer to Publication 970 (PDF), Tax Benefits for Higher Education; and Tax Topic 456, Student Loan Interest Deduction.
References: What are the limits for deducting interest paid on a student loan?
The maximum deductible interest on a qualified student loan is $2,500 per return. If you are a taxpayer whose return status is married filing jointly, you are allowed to deduct the full $2,500 only when your Modified Adjusted Gross Income (MAGI) is $100,000 or less. If your MAGI is between $100,000 and $130,000, the amount of your student loan interest deduction is gradually reduced. The instructions for Form 1040 (PDF) show you how to compute the deduction. If your MAGI is $130,000 or more, you are not able to take any deduction.
For those whose filing status is single, head of household, or qualifying widow(er), the full $2,500 deduction is allowed for MAGI levels equal to or below $50,000. For MAGI between $50,000 and $65,000, the deduction amount is phase out, and computation instructions are provided in the Instructions for Form 1040. If your MAGI amount is, $65,000 or more, there is no deduction.
There is no deduction if you file as married filing separately, if you are claimed as a dependent, or if the loan is from a related party or a qualified employer plan. For more information, refer to Publication 970 (PDF), Tax Benefits for Higher Education; Tax Topic 505, Interest Expense; and Tax Topic 513, Educational Expenses.
References: Is the $2,500 maximum deduction for student loan interest per PERSON, or per RETURN? I am married filing jointly, and have paid over $3,000 of qualified interest payments for my husband and I. Are we allowed to deduct $5,000 ($2,500/person) or only $2,500 total on our return?
The deduction is limited to $2,500 per return for tax year 2001 and beyond. If you file as "married filing separately," there is no deduction. For more information, refer to Publication 970 (PDF), Tax Benefits for Higher Education; and Tax Topic 505, Interest Expense.
References: If I file married filing separately can I claim the student loan interest deduction?
No, you cannot claim the deduction in any tax year in which your filing status is "married filing a separate return." For more information, refer to Publication 970 (PDF), Tax Benefits for Higher Education, Tax Topic 505, Interest Expense; and Tax Topic 513, Educational Expenses.
References: I am a parent repaying a loan for my daughter's college education. The loan is a parent's loan taken out in my name. Is the interest deductible on my tax return?
If your daughter was your dependent when you received the loan, the interest you paid on the loan is deductible, provided all other requirements are met. For more information, refer to Publication 970 (PDF), Tax Benefits for Higher Education; Tax Topic 505, Interest Expense; andTax Topic 513, Educational Expense.
References: My mother borrowed money for my college education. Now that I'm out of school, I make the monthly payments, but the loan is under her name. Can I take the student loan interest deduction since I'm actually making the payments?
You will not be able to take a deduction for the student loan interest that you pay because you are not the one obligated to pay on the loan. However, your mother may take the deduction, provided all other requirements for the deduction are met. The payment made by you is treated as a gift to her, and then a payment by her. For more information, refer to Publication 970 (PDF), Tax Benefits for Higher Education; Tax Topic 505, Interest Expense; and Tax Topic 513, Educational Expenses.
References: Last year, my parents took out a student loan for me in their name and I also took out a student loan. My parents received Form 1098-E for their loan and I also received Form 1098-E for my loan. Can we both claim the interest from the loans on our tax returns? Last year, I was not their dependent.
In order for a taxpayer to claim a deduction for student loan interest, the loan must be incurred for the taxpayer, the taxpayer' spouse, or a person who was the taxpayer's dependent when the taxpayer took out the loan. Since you were not your parents' dependent when they took out the student loan, the interest they paid on the loan does not qualify for deduction. However, the student loan interest payments you made on the student loan you took out on your behalf are eligible for deduction, provided all the other requirements are met. For more information, refer to Publication 970 (PDF), Tax Benefits for Higher Education; Tax Topic 505, Interest Expense; and Tax Topic 513, Educational Expenses.
References: 7.4 Child Care Credit/Other Credits: Hope & Life Time Learning Educational Credits I did not attend school this year, but made loan payments on a loan I previously took out to pay my college tuition. Can I claim a lifetime credit for the money I used to repay the loan?
No, payments on your student loans do not qualify for the Lifetime Learning Credit. However, interest on student loans may be deductible for Federal income tax purposes if you meet certain conditions. For more information, refer to Publication 970 (PDF), Tax Benefits for Higher Education.
References: 14.5 Electronic Filing and Tele-File: TeleFile
|
