If you paid on student loans last year, don’t forget that you can deduct the interest paid up to $2,500 as long as your parents don’t claim you as a dependent, writes Kiplinger. “You can deduct up to $2,500 in student-loan interest paid in 2007 if your income for the year was $55,000 or less if single, or $110,000 or less if married filing jointly.” If you make under $70k single or $140k married, you can still take a partial deduction.
You can take the deduction regardless of whether you itemize. You may even qualify to take the write-off yourself if your parents paid the interest on a loan for which you were legally liable (your parents, however, cannot claim the deduction if they weren’t liable for the loan).
The IRS says the $2,500 deduction can include “both required and voluntary interest payments,” which is a good thing to keep in mind in the coming months if you want to maximize the deduction for 2008.
“Deducting Student-Loan Interest” [Kiplinger]
RELATED
“Student Loan Interest Deduction” [IRS]
(Photo: Getty)
More From Consumerist
-
Now You Can No Longer File Class-Action Suits Against StubHub; Here’s How To Opt Out
-
Twinkies & Wonder Bread To Likely End Up With Different Parents Following Hostess Collapse
-
Mummified McDonald’s Burger Found In Closet, Still Looks Edible
-
Rich Families Hiring Tour Guides With Disabilities So They Can Skip Long Lines At Disney World
-
Is Seattle Plastic Bag Ban Actually Leading To More Shoplifting?
It’s a deduction, not a credit. A deduction reduces the amount of taxable income you have, where as a credit reduces the amount of tax you pay.
Also, to current students and people who just graduated, don’t forget to claim your Hope Credit or Lifetime Learning Credit. It changed my refund from $50 to almost $2000.
I didn’t realize you could take the deduction if you didn’t itemize. We’re taking the standard deduction this year (we didn’t have enough other deductions to make itemization worthwhile), so we were just going to pass on the student loan interest as well. Consumerist comes through again!
Ugh…no deductions above $70k :/
How about if I paid a loan that my parents are legally responsible for? I know I am not able to to claim the deduction, but can my parents claim the deduction? Specifically, I am paying the PLUS loan that my parents took out to pay for my college education.
And you can’t file married separately to get under the income restriction. If you make 40k and your spouse makes 100k, the deduction is out of reach. Yet another hidden marriage tax.
Right…a deduction. So this is only worth whatever tax bracket you are in…
This needs to become a tax CREDIT.
@FIGHTONTROJANS
That is what I do. One of my loans is a PLUS loan in my parents name. What they do is do their taxes twice, once with the PLUS loan figured in and once without. Whatever the difference in the refund is, they cut me a check.
Last year I got $700 from them.
@POP SOCKET that’s not a “hidden marriage tax” that’s the tax law being sensible. If they limit the deduction by income, why should you be able to file separately as an end run around the fact that you have a combined income of $140K? If it has limits, they should be based in the reality of your situation, not on how you play games with filing.
But don’t worry, I get screwed too, in my own way. Two years ago my (same-sex) partner couldn’t get a job, and made damn near nothing, (though just enough to screw me out of head-of-household status). But since we can’t be married in the eyes of the federal government, I made too much to deduct my student loans. Were we able to file as “married,” when for all practical purposes we were a married couple on a single income, I would have saved $3000 that year. That sucked.
But at least he has a job now. =)
I’m waiting for the year that my husband and I ONLY pay $2500 in student loan interest… We’ll hit the married-filing-jointly income cap before that happens.
The 70k line sucks. That’s barely enough to survive in San Francisco.
I hate this deduction:
“if your income for the year was $55,000 or less”
Read: “You can deduct the interest, unless you invested the loan in a useful degree where you actually make some decent money”
I’ve never been able to take the deduction – instead, it feels like I’m letting my tax dollars pay for all the f*-ups with worthless degrees.
I don’t think I know anyone who makes $55,000/yr, but then, I work in TV.
I just have to wait for the form to arrive from my lender letting me know how much interest I paid last year.
@chrisgeleven: HAH! I owe them so much money, I figure that would just be a payment on the interest! But, hey, thanks for the info. I’ll pass it along to them and hopefully they can claim that deduction.
@theblackdog: Just FYI, some lenders let you look up that information on their website.
@Skiffer: Let me be the first to call you a douche.
According to the US Census:
Just to be clear, when they refer to ‘adults’ they mean people of all ages and levels of professional experience who have bachelor’s degrees. So, if I follow you correctly, somewhere around half of the people with college degrees are useless f$%^ups. Nice.
To put the shoe on the other foot for a moment, you know which tax deduction irks me? The one you can take for losses in the stock market. Isn’t that sweet? You can be a hotshot trader and the government will give you part of your money back when you pick losers. Personally, I’d rather see my tax dollars go to education instead of pricks on Wall Street pushing around paper.
@JiminyChristmas:
A) Distribution isn’t necessarily uniform & probably not too representative of entry-level / those with loans / etc. Probably actually more than half fall below the $55K limit…
B) For every winner, there’s gotta be one or more losers…
C) I love trolling – take a deep breath, calm down and enjoy your ~$700 refund
BTW:
The investment loss deduction seems like a good idea to me. It’s a good benefit to promote investment and economic growth by reducing some of the downside risk. Also, as far as short-term traders – it’s pretty much a zero sum game. For every loss deducted, there’s a gain that’s taxed (waived if held more than a year).
thanks consumerist! keep the tax tips coming.
Me = Masters degree recipient, making ~$53K/year (therefore a loser), renting not owning (and therefore not itemizing), so this deduction has been a godsend.
Seriously: the whole “Who doesn’t make $70K a year?” bit walks right on the razor’s edge of the whole 50-page-long, knock-down-drag-out Cost of Living debate. And I’m not ready for that today.
How do I figure out the partial deduction amount? I may have earned more than $55,000 last year. Not sure until I see forms from my employers.