If\u00a0 you\u2019re a college or university student (or have been in the past), there\u2019s a good chance that you procured a student loan to cover your tuition costs, and in the interest of taking good care of your finances, both present and future, you\u2019ll want to be aware of what your student loan means to your taxes.<\/p>\n
Student loans come with various tax breaks that you want to take advantage of to mitigate the sizable debt you\u2019ve likely taken on, though you\u2019ll also want to watch out for certain filing mistakes related to misunderstandings of student loan issues.<\/p>\n
While you may be living off at least part of the money you\u2019ve received in student loans, when filing your taxes, never claim any portion of student loans as actual income. Student loans, no matter what they may contribute to your day-to-day living expenses, are not regarded by the IRS as income unless you make the costly mistake of filing them as such, in which case they will be taxed accordingly (and unnecessarily).<\/p>\n
totu.\u00a0Tax credits<\/a> are intended to encourage certain behaviors (like pursuing higher education) that promote social and economic benefit, so the government provides a tuition and fees deduction to this end. This deduction can be applied toward your income for up to $4,000, depending on the cost of your education from year to year, and rather than being determined by the amount of loans you take out it\u2019s determined by your tuition costs.<\/p>\n For example, if your yearly tuition costs are $10,000, you can deduct $4,000 from your annual income, which for most people will reduce their tax payment approximately $1,000 (more or less, depending on your tax bracket).<\/p>\n Just as the government provides incentives for taking out a mortgage loan (through tax breaks on the loan\u2019s interest) since it considers homeownership a social and economic benefit, so too does it provide incentives for taking out a student loan.<\/p>\n If you have begun payment on your student loans, it\u2019s important to take this into account when filing your taxes because the IRS will reimburse you for a portion of the interest on them. Provided you make less than $75,000 yearly filing individually or $155,000 filing jointly, you can be eligible for as much as $2,500.<\/p>\n It\u2019s not difficult to report your student loan interest, since at tax season your lender will mail you a statement reflecting exactly the amount of interest you paid in the last tax year on your student loan.<\/p>\n Student loan forgiveness is a dream come true for many people, though it won\u2019t let you off the hook entirely since you may owe taxes on the amount you were forgiven, to the tune of thousands of dollars.<\/p>\n The \u201cgotcha\u201d comes in primarily with income-driven repayment plans like IBR or PAYE, where the amount of your student loan debt that was forgiven is treated like ordinary taxable income. (Yes, it can seem a bit ironic that just earlier we were cautioning against claiming your student loans as income, only to hear several paragraphs later that when these loans are forgiven, the IRS may treat them as just that.) To get further details on this particular \u201cplot twist,\u201d see \u201cStudent Loan Forgiveness And Taxes<\/a>.\u201d<\/p>\n If you default on your student loans, your lender will use every legal avenue to collect payment, and this can mean using a tax offset, which is simply the technical term for garnishing your tax refund.<\/p>\n Tax offsets are\u00a0 levied only on federal student loans where there has been a sustained lapse in payments with prior attempts to collect, so you don\u2019t need to be overly concerned about this happening to you \u201cout of the blue.\u201d Tax offsets are often a \u201clast ditch\u201d resort to collect payment, and if you\u2019re having trouble paying your student loans, student loan rehabilitation can get you back on track.<\/p>\n Whether you\u2019re still a student or are a post-grad in the process of paying off your student loans, when it comes time to file your taxes<\/a>, you\u2019ll find everything you need here (including free professional tax support) to help you take advantage of the tax breaks that come with the costs of investing in your education.<\/p>\n","protected":false},"excerpt":{"rendered":" If\u00a0 you\u2019re a college or university student (or have been in the past), there\u2019s a good chance that you procured a student loan to cover your tuition costs, and in the interest of taking good care of your finances, both present and future, you\u2019ll want to be aware of what your student loan means to your taxes.<\/p>\n
![Tax credits<\/a> are intended to encourage certain behaviors (like pursuing higher education) that promote social and economic benefit, so the government provides a tuition and fees deduction to this end. This deduction can be applied toward your income for up to $4,000, depending on the cost of your education from year to year, and rather than being determined by the amount of loans you take out it\u2019s determined by your tuition costs.<\/p>\nFor example, if your yearly tuition costs are $10,000, you can deduct $4,000 from your annual income, which for most people will reduce their tax payment approximately $1,000 (more or less, depending on your tax bracket).<\/p>\nJust as the government provides incentives for taking out a mortgage loan (through tax breaks on the loan\u2019s interest) since it considers homeownership a social and economic benefit, so too does it provide incentives for taking out a student loan.<\/p>\nIf you have begun payment on your student loans, it\u2019s important to take this into account when filing your taxes because the IRS will reimburse you for a portion of the interest on them. Provided you make less than $75,000 yearly filing individually or $155,000 filing jointly, you can be eligible for as much as $2,500.<\/p>\nIt\u2019s not difficult to report your student loan interest, since at tax season your lender will mail you a statement reflecting exactly the amount of interest you paid in the last tax year on your student loan.<\/p>\nStudent loan forgiveness is a dream come true for many people, though it won\u2019t let you off the hook entirely since you may owe taxes on the amount you were forgiven, to the tune of thousands of dollars.<\/p>\nThe \u201cgotcha\u201d comes in primarily with income-driven repayment plans like IBR or PAYE, where the amount of your student loan debt that was forgiven is treated like ordinary taxable income. (Yes, it can seem a bit ironic that just earlier we were cautioning against claiming your student loans as income, only to hear several paragraphs later that when these loans are forgiven, the IRS may treat them as just that.) To get further details on this particular \u201cplot twist,\u201d see \u201cStudent Loan Forgiveness And Taxes<\/a>.\u201d<\/p>\nIf you default on your student loans, your lender will use every legal avenue to collect payment, and this can mean using a tax offset, which is simply the technical term for garnishing your tax refund.<\/p>\nTax offsets are\u00a0 levied only on federal student loans where there has been a sustained lapse in payments with prior attempts to collect, so you don\u2019t need to be overly concerned about this happening to you \u201cout of the blue.\u201d Tax offsets are often a \u201clast ditch\u201d resort to collect payment, and if you\u2019re having trouble paying your student loans, student loan rehabilitation can get you back on track.<\/p>\nWhether you\u2019re still a student or are a post-grad in the process of paying off your student loans, when it comes time to file your taxes<\/a>, you\u2019ll find everything you need here (including free professional tax support) to help you take advantage of the tax breaks that come with the costs of investing in your education.<\/p>\n","protected":false},"excerpt":{"rendered":"If\u00a0 you\u2019re a college or university student (or have been in the past), there\u2019s a good chance that you procured a student loan to cover your tuition costs, and in the interest of taking good care of your finances, both present and future, you\u2019ll want to be aware of what your student loan means to your taxes.<\/p>\n...<\/span> Read More<\/a><\/p>\n","protected":false},"author":1,"featured_media":491,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-490","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/www.e-file.com\/info\/wp-json\/wp\/v2\/posts\/490","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.e-file.com\/info\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.e-file.com\/info\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.e-file.com\/info\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.e-file.com\/info\/wp-json\/wp\/v2\/comments?post=490"}],"version-history":[{"count":2,"href":"https:\/\/www.e-file.com\/info\/wp-json\/wp\/v2\/posts\/490\/revisions"}],"predecessor-version":[{"id":493,"href":"https:\/\/www.e-file.com\/info\/wp-json\/wp\/v2\/posts\/490\/revisions\/493"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.e-file.com\/info\/wp-json\/wp\/v2\/media\/491"}],"wp:attachment":[{"href":"https:\/\/www.e-file.com\/info\/wp-json\/wp\/v2\/media?parent=490"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.e-file.com\/info\/wp-json\/wp\/v2\/categories?post=490"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.e-file.com\/info\/wp-json\/wp\/v2\/tags?post=490"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}](\"https:\/\/www.e-file.com\/help\/popular-tax-credits.png\"){kind=link}