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Maximum deduction for student loan interest is up to $2,500. Even if you do not list this deduction on Schedule A of your 1040, you can still take it as the deductions are taken as adjustment to your income. Taxpayers whose adjusted gross income lies in the $50,000 - $65,000 slab (single filers) and $100,000 - $130,000 (married filing jointly) are not eligible for the deduction and so are those who are married and file separate returns.
Criteria for Stafford Loan tax benefit:
- The person must have been enrolled at least half-time in a degree program for whom the expenses were incurred.
- Interest would need to paid on a qualified education loan for you, your spouse, or a dependent at the time of borrowing of the loan.
- You should not have been claimed as an exemption on anyone else's tax return.
- Double-dip is not permissible. This would mean that if the interest is deductible somewhere else on the return, such as home mortgage interest, you cannot include the deduction as student loan interest also.
- Some education expenses which are eligible include tuition, fees, room and board, books, supplies, and equipment, transportation costs, and other essential expenses included in the school's student budget.
- You cannot avail of the deduction when you've paid for the expenses by using specific tax-free education benefits. These include employer education assistance, tax-free withdrawals from a Coverdell Education Savings Account, US savings bond interest, veterans educational assistance benefits, and certain scholarships.
For any queries or clarifications that you may need on Stafford Loans or Stafford Loan tax benefits, do email us or call us at (800) 821-5659. Our expert loan advisor would talk to you..
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