Tax Breaks for Student Loans
By Roxana Hadad
September 05, 2007
Qualified Educational Expenses
To take this deduction, you must have used your loan only for certain kinds of expenses that contribute to your education. The expenses that qualify include tuition, fees, room and board, books, supplies and other related expenses. These expenses must come from your enrollment in a degree, certificate or similar program at an eligible institution. Eligible institutions include most colleges, universities graduate schools and vocational schools.
Eligible loans include the Federal Stafford and the Federal PLUS loans, other federal education loans, personal loans issued by banks and other financial institutions and home equity loans. You can’t use the loan money for purposes other than qualified educational expenses.
You may only deduct interest that was paid during the tax year, as long as the payments were due and made during the first 60 months of repayment.
Keep in mind that if you’re planning to take this deduction, you should save any receipts and bills for your educational costs. If you’re audited you’ll need them in order to document to expenditures.
For more details on the tax break on student loans, visit the IRS Web site at http://www.irs.gov/. Check out:
- “Publication 970, Tax Benefits for Higher Education”—http://www.irs.gov/pub/irs-pdf/p970.pdf
- Student Loan Interest Deduction—http://www.irs.gov/—Go to “Help”, click on “FAQs” (on the left), scroll down near the bottom of the page and click on “Student Loan Interest Deduction”
You can also call the IRS to ask questions or request forms and publications. The toll free number for tax questions is 1-800-829-1040. The toll-free number for requesting forms is 1-800-829-3676.
Look into the IRS tax breaks and see if you’re eligible. You just might look forward to filing your taxes this year!