STATEN ISLAND, N.Y. — Student loan borrowers who started making payments last year after the freeze ended may qualify for a tax credit.
Interest on federal student loans will begin accruing again on September 1, with the first payments scheduled for October for millions of Americans. Therefore, if you start making payments, you may be eligible for a federal tax deduction on the interest.
This benefit applies to all loans used to pay for higher education costs up to $2,500 per year, not just federal student loans.
According to the federal government, interest that you pay personally is generally not deductible on your tax return, except for certain mortgage interest. This interest on student loans is an exception.
In 2023, if your modified adjusted gross income is between $75,000 and $95,000 for single filers, or between $155,000 and $185,000 for joint filers, your student loan interest deduction will be phased out. Masu.
You cannot claim this deduction if your gross income is $90,000 or more for single filers or $185,000 or more for joint filers.
The student loan interest deduction is claimed as an adjustment to your income. This means you can claim this deduction even if you don’t itemize it on Schedule A (Form 1040).
To qualify, student loans must only be used to pay for qualified education expenses and cannot be borrowed from a related party or made under a qualified employer’s plan .
For purposes of student loan interest deductions, these costs are the total cost of attending a qualifying institution. These include payments for tuition, fees, room and board, books, supplies, equipment, and more. Other necessary expenses such as transportation expenses.
Additionally, taxpayers will not be able to deduct interest paid under the Education Assistance Program by an employer after March 27, 2000 and before January 1, 2026 as student loan interest. A warning is also being issued.
You cannot claim student loan interest deduction for the following items:
- Interest paid on a loan when no interest is legally required to be paid under the terms of the loan.
- Loan origination fee. Payment for real estate or services provided by a lender, such as commitment fees and processing costs.
- Interest paid on a loan to the extent that payments are made through participation in the NHSC Loan Repayment Program or certain other loan repayment assistance programs.
The deadline to file your tax return is Monday, April 15th.
read more IRS.gov.