by ralph and jenny, on Flickr
This part of my continuing series on things everyone should know about taxes.
Yes, student loans are tax deductible, (subject to various limits). They are deductible as an “adjustment to income” rather than as an “itemized deduction.” This means that you can deduct student loans from your taxable income even if you do not itemize your deductions.
Here are the basic rules:
- Maximum deduction is $2,500.
- Student loan must have been taken out to pay tuition or other qualified education expense (such as room, board, books, supplies and equipment)
- Student loan cannot be from a relative or from an employer plan.
- Your, your spouse or your dependent must be the student.
- Said student must be enrolled at least half-time.
- There is a phaseout for taxpayers with modified adjusted gross income exceeding $75,000 ($150,000 if married filing jointly). Taxpayers earning more than these amounts will have their deduction reduced.