A taxpayer who paid interest on a student loan may be able to claim a tax deduction up to $2,500.
The deduction is phased out for individuals filing single tax returns with income of $65,000, and for couples filing joint tax returns with income of $130,000.
However, the deduction is only allowed for a taxpayer claiming the dependency exemption for the student. If the parent paying the student loan transfers the dependency exemption to the other parent, neither parent can claim the student loan interest deduction.
For married taxpayers, even if they are separated, a joint tax return must be filed to claim the deduction. The only exception is for separated individuals qualifying as head of household under the abandoned spouse rule.
For those saving and/or paying for college, proper tax planning can help maximize the resources needed for college.
- On July 16, 2012