San Antonio students saddled with the weight of student loan debts may find some relief during tax season. According to Fox San Antonio, those who have paid interest on their student loans might be eligible for a tax deduction up to $2,500. However, certain conditions need to be met to benefit from this potential financial reprieve.
Recently payments on federal student loans restarted, hitting more than 40 million Americans in their wallets. Those who began repaying could, however, see an upside to this necessary expense when they file their taxes. As reported by USA TODAY, the federal tax deduction on interest doesn't require itemization which simplifies the process for many.
There are limitations and eligibility criteria to consider. Single filers with a modified adjusted gross income above $75,000 begin to see this benefit phase-out, with it disappearing entirely at $90,000. For joint filers, these limits are set at $155,000 and $185,000, respectively. To qualify, no other party can claim you as a dependent, and your name must be on the loan either as the owner or co-signer. "if the kid is legally obligated to pay and pays off the loan but the parents or someone else claims them as a dependent, no one gets the deduction,” Mark Steber, chief tax officer at Jackson Hewitt, told USA TODAY.
The types of interest deductible include federal and private loans, loan origination fees, and capitalized interest. Also, the IRS allows deductions for interest on revolving lines of credit that are used exclusively for qualifying education expenses. Exclusions do apply, particularly in cases of double benefits like employer educational assistance or qualified tuition plans such as 529s. Reporting on the tax deduction for student loan interest, it also includes refinanced and consolidated loans, provided they're used only for education expenses.
