Salt Lake CPA – Student Loan Interest Deduction

Salt Lake CPA – Student Loan Interest Deduction

A client called me today confused over who can take the student loan interest deduction.  He said he was told by another CPA that if he paid on his child’s loan, he could take the deduction even if his child was not a dependent.  I had to tell him the bad news that this was not correct.  According to Publication 970 you can take the deduction on qualified student loan interest if ALL of the following conditions are met:

  • Your filing status is any filing status except married filing seperately
  • No one else is claiming an exemption for you on his or her tax return
  • You are legally obligated to pay interest on a qualified student loan
  • You paid interest on a qualified student loan
Examples that are mentioned in this publication as exceptions are when a parent pays a loan payment for a non dependent child as a gift.  This payment is still deductible by the child.  Another example would be if the a parent is obligated on the loan and the educational expenses are incurred while the child was a dependent, then interest payments made by the parent on the loan would be deductible on the parents return.  Please keep in mind that the amount of interest that can be deducted on an individual tax return is capped at $2,500 per year.  Also, the deduction is only available to the following modified adjusted gross income limits:
  • single, head of household or qualifying widowers  less than $60,000 – not affected by phase out                                                                                                                                  between $60,000 and $75,000 – reduced by phase out                                                                                                           $75,000 and over  – no deduction
  • married filing jointly                                                            less than $120,000 – not affected by phase out                                                                                                                             between $120,000 and $150,000 – reduced by phase out                                                                                                       $150,000 and over no deduction
If you should have any further questions, please call us. (Salt Lake CPA – Student Loan Interest Deduction)

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