Given the incredible expense of attending college and graduate school, the student loan interest deduction is a very popular deduction against personal taxes. Sallie Mae is a financial-services company that specializes in educational loans. This discussion of student loan deductions applies to loans serviced by Sallie Mae as well as government-sponsored loans and student loans that originated from other financial-services companies.
Student Loan Interest Deduction Basics
If you are paying back qualified student loans and you have paid interest, you may be eligible to receive a deduction of up to $2,500 to reduce your taxable income. All taxpayers may be able to utilize this deduction if they meet certain requirements. You do not have to itemize your deductions in order to receive this deduction.
Only certain taxpayers are eligible to take this deduction. If you are single, a head of household or a qualifying widower, your modified adjusted gross income cannot exceed $75,000. Married couples filing a joint return can have a modified adjusted gross income of $150,000. The deduction is not an all-or-nothing deduction. It begins to phase out when your modified adjusted gross income reaches $60,000 for single filers and $120,000 for married couples filing a joint return.
What is a Qualified Student Loan?
You may only deduct interest from qualified student loans. To be a qualified student loan, the loan proceeds must be used by you, your spouse or one of your dependents. The loan proceeds must be used for qualified education expenses during an academic period for an eligible student who is enrolled at least half-time that were paid or incurred within a reasonable period of time when you obtain the loan. Qualified student loans may be made by Sallie Mae or a variety of other lenders, but may not be made by any of your relatives or a qualified employer plan.
What are Qualified Education Expenses?
Qualified education expenses are the basic expenses required for attending an eligible institution of higher education. These expenses include, but are not limited to, tuition and fees, room and board, books and equipment and other necessary expenses.
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