| Q: |
Is there a tax deduction available for student loan interest? |
| A: |
Yes! Under Section 221 of the Internal Revenue Code borrowers can deduct some of the interest that they have paid on student loans. If you have taken out loans to pay for the cost of attending an accredited college for yourself, your spouse, or a dependent, then you may be eligible for this deduction. The deduction works as an adjustment to reported income on your tax forms. Students who paid interest on “qualified” student loans may deduct up to $2,000 of the interest paid. |
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| Q: |
Am I eligible to take the deduction? |
| A: |
Any borrower with a "qualified" student loan (as explained below) is eligible. If you have taken out “qualified” loans to pay for the cost of attending an accredited college for yourself, your spouse, or a dependent, then you may deduct the interest that you pay on those loans. |
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| Q: |
What are “qualified” loans for purposes of the deduction? |
| A: |
“Qualified” loans include those taken out to pay tuition, fees, living expenses, books, supplies, transportation, and equipment expenses. Most federal and private education loans would be eligible for this type of deduction, including all Federal Stafford, PLUS and Consolidation Loans. Private student loans do not automatically qualify. However, if you send your private loan lender a W-9S form, the interest paid on your private loans would be eligible for deduction. A W-9S is an IRS form, which certifies that the funds disbursed were used solely for education expenses such as those mentioned above. |
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| Q: |
How much interest can I deduct? |
| A: |
Students who paid interest on “qualified” student loans may deduct up to $2,000 of the interest paid. Similar to education tax credits, the deduction is reduced as income increases, beginning at $40,000 for single filers and $60,000 for joint filers. If you are a single tax return filer with an income of $55,000 or a joint tax filer with income greater than $75,000, you will not be eligible for this interest deduction.
Your lenders will automatically send all eligible borrowers of FFELP loans a 1098E form stating the amount of interest paid for the year. If you want to include interest paid on private student loans, then you must provide your lender with a W-9S form. As the taxpayer, it is your responsibility to determine how much of the stated interest is eligible for the deduction. |
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| Q: |
For how many years can I claim the deduction? |
| A: |
The interest deduction can be taken for the life of the loan, as of tax year 2002. Prior to 2002, deductions were allowed only for interest paid during the first 60 months of the repayment period. |
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| Q: |
Where can I find tax forms like the W-9S form, as well as additional information regarding taxes and deductions? |
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Additional information and forms are available on the website of the IRS at www.irs.gov, or at your local library. You can also consult your tax advisor for more information.
Always consult a tax advisor for tax advice and complete details regarding these tax provisions. |
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