When you pay student loan interest, you could be eligible to take a deduction on your tax return. Here are the basics of how the student loan interest tax deduction works.
Deduction According to current IRS laws, you can deduct the amount of student loan interest that you pay from your taxable income every year. In order to do this, you will have to itemize your deductions instead of taking the standard deduction. This means that unless you have other deductions, you will not be able to take advantage of this deduction. Forms If you want to claim this deduction, you will need to include it on your Schedule A Form 1040 of your tax return. In order to know how much money you have paid in interest over the course of year, your lender is going to send you a Form 1098-E. This will itemize exactly how much money you have paid to them and how much of that is interest. Effect By reducing the amount of taxable income that you have, this could potentially put you into a lower tax bracket. It will also reduce the amount of income taxes that you are required to pay.
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