Once you graduate, if you opted to finance your education, you’ll be responsible for paying back any student loans. While you won’t see a direct tax break in accordance with student loan repayment, you can deduct interest that you’ve paid, up to $2,500.
Student loan interest is deducted through Form 1040, on line 33. Using electronic filing software is the simplest way to determine the deduction, as entering the interest amount is all you have to do, and the software will calculate the deduction for you.
In order to deduct interest on a student loan, the following must all be true:
- You paid interest on a qualifying student loan during the year
- You are not married, filing separately
- You must have an adjusted gross income of less than $65,000 if using status Single, Head of Household, or Qualifying Widow(er)
- No other taxpayer claims you as a dependent on their return
Unlike previous rules, which required you to be fully responsible for the debt in order to claim the deduction, you are currently able to deduct interest even if your parents pay back the loan. However, you still aren’t eligible to be a dependent.
That stated, the deduction only qualifies for the person who took out the student loan. This means that your parents are able to claim the deduction if the loan is in their name.