Many also need to investigate tax credits and student loan interest deductions, which can help them save significant money. (Photo: The Century Foundation)
For students in the United States, figuring out their finances while attending college is an exciting, daunting, and time-consuming experience.
Many also need to investigate tax credits and student loan interest deductions, which can help them save significant money, particularly after graduation.
Taxpayers who make payments on a qualified student loan might be eligible for relief if the loan was only used for higher education expenses.
Students and parents can take advantage of tax breaks that save them thousands of dollars on tuition, books, fees, and supplies.
READ ALSO: Student Loan Interest Deductions 2023: How to Claim It?
What Is the Interest Deduction on Student Loans?
The student loan interest deduction is a federal income tax deduction that allows borrowers to deduct up to $2,500 from their taxable income for interest paid on qualified student loans. It is one of several tax breaks available to students and parents to assist with the cost of higher education. To qualify for the deduction, individuals must meet specific eligibility criteria, including filing status, and are subject to a student loan interest deduction phase-out based on income level.
What percentage of student loan interest is tax deductible?
Student loan interest is the interest you pay on a qualified student loan during the year, which includes both required and voluntary pre-payments.
Who is eligible for tax breaks on student loan interest?
You must have paid interest on a qualified student loan in the tax year 2022 and be legally obligated to pay interest on a qualified student loan to be eligible for the Student Loan Interest Deduction.
Those whose filing status is married filing separately and those whose MAGI exceeds a certain amount (set annually) are not eligible for the scheme.
READ ALSO: Biden Student Loan Forgiveness Plan; How Will it Slash Your Loans Into Half?
