Student Loan

When is deduction on Interest on loan available to a student?

Generally, personal interest you pay, other than certain mortgage interest is not deductable.

However, You may take this deduction only if you satisfy all the four conditions, which are as given below:

  1. You have paid interest on a qualified student loan.
  2. Your filing status is any status except married filing separately.
  3. Your modified adjusted gross income (AGI) is less than: $65,000 if single, head of household, or qualifying widow(er); $130,000 if married filing jointly.
  4. You have not been claimed as a dependent on someone’s (such as your parent’s) tax return.(No one else is claiming an exemption for you on his or her tax return.
  5. you have to fulfill the loan qualification and student qualification criteria.

To whom deductions on Students Loan Interest available and upto what amount?

You would be eligible to get deductions if you don’t satisfy any of the conditions given below:

  1. If another taxpayer claims an exemption for you as a dependent, Your filing status is married filing separately, or You are not legally obligated to make payments on the loan.
  2. You may be able to deduct up to $2,500 for interest you pay in year on a qualified student loan. And, if your student loan is canceled, you may not have to include any amount in income. 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 $105,000 or less. If your MAGI is between $105,000 and $135,000, the amount of your student loan interest deduction is gradually reduced. If your MAGI are $135,000 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 phased out. If your MAGI amount is, $65,000 or more, there is no deduction.

Can I take the student loan interest deduction when I am not borrower but 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, the borrower may take the deduction, provided all other requirements for the deduction are met.

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