One of the ways that parents and others can reduce the amount of money paid into student loans is to count it as a deduction on your income tax forms. The U.S. Government allows you to deduct up to $2,500 a year on interest paid on student loans. Checking the “student loan interest deduction” option to get this deduction. Remember that this can be done every year that you pay interest.
Getting the student loan interest deduction is vital because it allows people to get back a large portion of interest payments that they make in a given year on student loan payments. This is one of those tax “loopholes” that allow the borrower to get back a good portion of their student loan payments. The best part about this option is that the borrower or student who makes interest payments on their student loan can be applied every year. This amounts to a nice, regular tax break that someone can always count on, provided payments on the student loan are made on a regular basis.
People don’t often think about taxes. Understandably, it’s better to forget about them if you want to be happy. But taxes can help save money over a year when you claim deductions. Getting a deduction on student loans is a great way to get back what you pay in.
What if someone cannot pay every month on interest payments?
If for some reason a borrower can not make interest payments every month, they can still claim the deduction for any amounts that they paid in on their student loan. It’s important to note that this does not include payments on the principal. It must also be made on federal student loans. Private student loans do not qualify for student interest loan deductions.
How to Claim Student Loan Interest Payments
If someone is using an automated tax preparation software such as Turbotax or H & R Block tax software, the program will take the user through the process of filing a deduction for student interest loan payments. It is a simple process when going through automatic software. These programs aggregate the data from previous tax years, and they also have access to federal student loans that someone took out to go to school. The user usually won’t even have to have a printed copy to use this option.
If someone is filling out their paperwork by hand, it may take a little more work, but it will still be worth it to prove that payments are being made on student loan interest. It can save a great deal of money on federal tax returns.
This is one of the examples of where knowledge is a powerful thing. Just knowing that borrowers can report all of their student loan interest payments on their tax returns and receive a nice $2,500 deduction is well worth the time it takes to file this information.
Learn how to claim student interest payments on income tax forms to save money on student debt.