If you are a student or you were a student more than likely you have student loans. With the cost of education rising on a daily basis you will find that almost every one will need a loan to continue their education. However there is good news that comes with these student loans and that is the interest paid on your student loan may be tax deductible. Most people do not realize this and the information below will help to explain it to you.
Exceptions You Should Know About
Almost everyone who has a student loan is able to deduct the interest paid up to $2500. This should help to lower your tax bill. Not only will your tax bill be lower but also you will not have to itemize your deductions to have the student loan interest as a deduction. However you will not be able to use the tax form 1040EX you will be required to use the form of 1040A or 1040.
The next exception that you should know about before filing a tax return with your student loan interest on it is that if you are married you will not be allowed to file separately. You will need to file a joint return. The other exception when it comes to this is that if anyone else is able to claim you as an exemption you are not eligible for this type of deduction.
How To Be Eligible
For you to be able to use the student loan interest as a deduction you must have taken the student loan out for yourself, your spouse or one of your dependents. Most people think that the dependant needs to be a relative. This is false. The person you are claiming as a dependant must receive most of their support from you.
Another requirement from the IRS is that the student you are claiming must be enrolled in school at least half of the time. The school also needs to qualify as an eligible institution for education. This includes any college, university or other type of school that meets the student aid program requirements that are put forth by the United State Department of Education.
Using The Tax Deduction
When you are claiming the interest from the student loan you can use the deduction for the life of the loan as long as you have taken the loans for bad credit to pay for educational expenses. If you take out a different loan for personal expenses you will not be able to claim the interest as a tax deduction.
Qualifying Expenses
There are many different qualifying expenses that the student loan can be used for. These expenses include tuition and any fees, room and board, books, supplies and any other expense that is considered for schooling. The only requirement that the IRS has is that you need to be able to prove and identify where the money from the loan was spent.
Conclusion
Being able to claim the interest from a student loan makes for a great tax deduction. However you might find that if you make over a certain amount of money annually you will not be allowed this tax deduction. If you have any questions when it comes to this tax deduction you can check with a tax professional. They will be able to answer your questions for you.