The government wants to help promote education through certain means, and one of those means is through tax benefits.
If you have paid over $600 in student loan interest in 2018 the organization servicing your loan must provide you with a 1098-E statement. This statement will serve as proof of the amount you’ve paid in interest for the year.
So What Do I Do With This Statement?
The tax benefit associated with paying student loan interest is it is deductible against your income subject to tax. This will be subject to certain limitations, such as income limitations. Single filers with $80,000 in income or married filers with $160,000 in income are unable to deduct their interest payments.
In addition, being claimed as a dependent excludes you from being able to deduct your student loan interest.
If you are using tax software, there will be a place to fill out this information and match it to the form that you received. The software will likely be able to take care of the rest without any further intervention from you.
Can I Take This Deduction Even If I Don’t Itemize?
For the uninitiated, taxpayers have the choice of either itemizing their deductions (claiming deductions based on what they actually paid) or taking the standard deduction. For tax year 2018, the standard deduction is $12,000 for single filers and $24,000 for taxpayers that are married filing jointly.
Taxpayers will take the greater of their itemized deductions or the standard deduction.
Luckily, student loan interest is deductible whether you itemize your deductions or not. Student loan interest is a deduction for adjusted gross income, not from it.This makes it incredibly powerful, as it can be added on to the standard deduction.
This article is not intended to be tax, legal, or financial advice. For information regarding your specific situation, please consult your local professional.