Going to college can be expensive. You have to worry about which classes to take, what your grades say and how to find that internship that is going to push you into the future. All of this is a lot to take on, but the rising costs of tuition and attending college can make it even more of a challenge. Over the past few decades, the cost of going to college has gone up dramatically and most students have to work a lot during school or take out a lot of money in student loans.
Over time, these student loans are going to start adding up. They can soon get in the tens of thousands and even higher depending on how long you go to school for. When you get out of school, you have all of this debt that has high interest rates and can seem overwhelming to take control of, especially if you don’t even have a job yet. These loans can affect much of your life, including what job you are going to take, your ability to purchase a home or go on vacation, and so much more.
If you are making payments on your student loans, whether you are in school or just graduated, you could qualify for a deduction in your student loans to save money and perhaps even pay off the student loan debt faster than before. When you are ready to learn how to save the most money on your student loans at the end of the year, make sure to contact a tax professional in your area right away.
Student Loan Deductions
The student loan interest deduction is a great way for you to save some money when you do your job and pay back your student loans. Not only are you paying off some of those loans on time and reducing the amount that you are going to have to pay through the life of the loan, but you are also going to get some of that interest payment back at the end of the year.
It does not matter whether you are paying these loans back during school or after you graduate, you are still able to claim this deduction during the tax season. This is a good incentive to start paying back some of the loans when you are still attending school, if you are able to. This works to reduce the amount that you owe over time and you can still get the deduction. If you would like to see how much you are able to save with the student loan deduction on your tax return, make sure to contact a professional in your area to get started.
How Much to Save
When you claim this deduction, there are some limits on the amount that you are able to claim. Right now the deduction is up to $2500 in student loan interest. This is the maximum that you are able to claim. If you pay less than this amount during the year, you should only claim that amount. But if you spend more on your student loan interest during the year, you will only be able to claim the $2500 on your tax return.
Keep in mind that you are only allowed to claim the amount that you paid in interest payments over the year. While it would be nice to get to take off the whole amount that you spend through the year, you can only deduct the interest payments that you made. Make sure to talk to your tax professional before getting started to ensure that you are claiming as much as you can on the student loan interest deduction.
Smart Uses of the Deduction
There are many ways that you can choose to use your tax deduction. If you have a tax bill before this deduction, it is used to help pay off this tax bill. But if you have some leftover or didn’t have a tax bill to start with, you could have a tax refund coming your way. While it is possible to use this money in any manner that you choose, it is often a good idea to use it towards your finances to be better set for the following year.
To start, consider using this refund to help pay off some more of your debt. While it may seem like just a little bit, putting some of your money towards this debt is going to pay off big in the long run, by reducing the interest you pay and the amount of time that you have to pay these student loans overall. This can reduce a lot of debt, even more since you are dealing with interest in the process, and can be a great financial move.
If you have some other bills that you need to pay off and are more important than paying the student loans right away, you can also consider using the tax deduction for this as well. This can help to pay down those debts and will help you to get the financial freedom that you need.
Paying for college is never easy, but there are some simple steps that you can take that will help to reduce your tax bill or help out with some of your expenses when tax season comes along. Make sure to contact your tax professional right away to get started.
Patrick O'Hara, EA