Many people rely on various student loan programs in order to pay for college, graduate school, and career or vocational programs. Student loans can be a great way to help pay for the education you need, but, like most loans, they come with interest charges down the road.
Student Loan Interest: A Big Expense
While you are in school, you typically don’t have to pay back your student loans or pay interest. Some (but not all) loans don’t even start charging interest until you’re out of school.
Once you are no longer enrolled at least half-time, though, that interest kicks in and you typically have to start paying it along with repaying your principal loan amount.
Tax Deduction Offsets Interest Costs
The good news is that, in most cases, the student loan interest you pay during the year is tax deductible. The amount you can deduct is capped at $2,500, but that’s still a pretty hefty sum.
The student loan interest deduction is particularly useful because you can take it regardless of whether you itemize your deductions or take the standard deduction. Each year, your student loan servicer will send you a statement called a 1098-E detailing what you’ve paid in interest. You simply report that amount (or the sum of the amounts if you have multiple loan servicers) when you file your taxes.
If you have questions about the student loan interest deduction, or about any other tax deductions for which you might be eligible, contact your local tax pros at Taxation Solutions, Inc. We are here to help individuals and businesses in San Antonio with tax planning and tax advice year-round. Call our team today for local, reliable tax expertise!