A common question for 2015 tax is, can I claim a deduction for paying down my student loan? Absolutely yes! Make sure you claim your student loan interest payment deductions on your tax return. This can be a very valuable tax break and the net effect is reducing the interest that is paid on student loans. Taxpayers who owe student loans could actually see a significant amount of money deducted from taxes owed by repaying your student loans.
2015 Student Loan Interest Deduction
When filing 2014 taxes, keep an eye out for the Form 1098-E for tax year 2014. This form from your student loan lender will let you know how much interest you’ve paid on interest in student loans. You will use this Form 1098-E to determine how much you can deduct when you file your taxes (up to $2,500 for single filers). You can deduct up to $2,500 in interest paid on a qualifying student loan.
However, not everyone will be able to deduct their student loan interest on their tax returns. The student loan interest deduction begins to phase out if your adjusted gross income (AGI) is:
- $65,000 if filing single, head of household, or qualifying widow(er)
- $130,000 if married filing jointly
The deduction is completely phased out if your AGI is:
- $80,000 if filing single, head of household, or qualifying widow(er)
- $160,000 if married filing jointly
Modified adjusted gross income and Student Loan Deduction
Modified adjusted gross income for the purpose of calculating the student loan interest deduction means adjusted gross income without taking into account any deductions for student loan interest, for tuition and fees, or for domestic production activity; and by adding back any of the following exclusions: the foreign earned income exclusion, the foreign housing exclusion, the foreign housing deduction, and the income exclusions for residents of American Samoa or Puerto Rico.
If you didn’t get a Form 1098-E from your student loan lender, it might mean you paid $600 or less in interest in the past year . You can still claim the student loan interest deduction by putting the amount of interest you paid on your student loans onto your tax return.
Income Based Repayment or Income Contingent Repayment Deductions
You can take certain other deductions while on a Income Based Repayment or Income Contingent Repayment plan. you can still take the interest deduction mentioned above, too. According to IRS law, you’re allowed to deduct interest that you paid on qualified student loans regardless of your repayment plan. However, if the federal government ends up forgiving some of your student loan debt due to Federal Student Loan Forgiveness Programs in the future, you’ll have to pay taxes on any amount that is forgiven. This is the tax hit that can occur much farther down the road that student loan borrowers
Reference Material Relating to the Student Loan Interest Deduction
- Publication 970, Tax Benefits for Education (IRS.gov)
- Student Loan Interest Deduction, Tax Topic 456 (IRS.gov)
- Education-Related Adjustments, Publication 17, Chapter 19 (IRS.gov)