The topic of your taxes and your educatioal expenses, always lends itself to numerous questions. Here you’ll find answers to some of the most common tax questions surrounding student loans, student loan interest, and scholarships.
Can I claim student loan interest on my taxes?
Yes, there is a student loan interest tax deduction for those individuals who qualify. Qualifying individuals can take the student loan tax deduction regardless if they itemize or not, and the deduction applies to student loan interest on student loans in the individuals name, their spouses name (for those who file jointly), and/or their dependants name(s).
Student loan interest deduction for 2013 qualifications:
Qualifying taxpayers can take up to a maximum of $2,500 deduction on their taxes for student loan interest payments. In order to qualify for a student loan tax deduction, the student loan must have been taken out for only paying qualified education expenses, and the interest payment can not have been made by a related person or come from a qualified employer plan. The student loan must be for you, your spouse or a person you claim as a dependent. The limit or maximum on student loan interest deduction 2013 taxes is $2,500. There is also is phase out schedule for the deduction based on your modified adjusted gross income or AGI. The phase out starts when your AGI is over $60,000 (or $120,000 married filing jointly) and the phase out ends when your AGI is over $75,000 or $150,000 married filing jointly.
Student loan interest deduction forms:
If you’ve paid more than $600 on a qualified student loan, your lender will send you a Form 1098-E – Student Loan Interest Statement. Exact calculations for student loan interest deductions and the associated income tax forms can be found on the IRS website. If you use a tax preparation software, it should guide you through student loan tax deduction if you qualify. The student loan interest deduction is taken as an adjustment to income. This means you can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040).
Do I have to pay taxes on scholarship money?
Typically, college scholarships are not taxable, nor are they considered as income. However, if an individual uses any of the scholarship money on things deemed to be “non-qualified educational expenses”, then the individual is required by law to report that amount to the IRS. Non-qualified educational expenses can be anything not directly related to your college tuition fees, such as paying non-education related bills. If you have used the college scholarship on non-qualified educational expenses, or do not know if what you used the college scholarship money on would be deemed as a non-qualified educational expense, the best thing to do would be to speak with a tax professional or accountant. Tax laws can be difficult to understand and complicated, so to avoid any possible fees or penalties it’s always best to check with a tax professional if you have questions.
Can I deduct my college tuition and fees?
If you or a dependent student have accrued tuition and fee expenses required by the enrollment processes of an accredited college or university, then you are qualified to reduce your taxable income by up to $4,000.
Can I qualify for any tax credits related to my college education?
Yes, most parents or students can qualify for a tax credit related to their enrollment in college.
The American Opportunity Tax Credit
The American Opportunity Tax Credit can provide an annual credit of up to $2,500 per student, for those who qualify. If your modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return, you should qualify for the full tax credit.
The Lifetime Learning Credit
The Lifetime Learning Credit could provide a tax credit of up to $2,000 for qualified education expenses paid for all students enrolled in eligible educational institutions.