During tax time, it is important to find all of the credits and deductions that you qualify for. Some may be ones you have been claiming for years and others could be new. As your tax situation changes, such as getting married, getting a home, or going to school, your tax status, as well as your eligible deductions, are going to start changing.
If you are going to school, or have just finished, you may be able to get a deduction based on your student loans. You will need to pay off some of your student loans, or at least the interest on the loan, in order to get the deduction, but it can help you to save a lot of money and get even more back on your tax return. When you are ready to get this deduction, as well as all the others that you qualify for, make sure to contact your tax professional to get started.
Saving on Student Loan Payments
This is a pretty straightforward deduction. If you have any student loans, whether they are private or government sponsored loans, and you pay any interest on them throughout the year, you will be able to use this money as a deduction. Your student loans, no matter where they come from, should send you the right forms to tell you the amount that you have paid. Keep in mind that you cannot claim the whole amount that you paid through the year; you are only able to take the interest, so these forms can be nice for helping you to know the exact amount that you need.
In most cases, you will need to take these papers and then use the numbers inside to show how much you paid in interest through the year. If you need help with this or want to figure out if you are paying the right amount, make sure to contact your local tax professional to help you get the most out of this deduction.
Who Can Claim?
Anyone who has student loans and who is making some sort of payment through the year, even if it is just one payment a year for a small amount, can claim this deduction. It does not matter whether you are in school or working, as long as you made some sort of payment on the student loans during the year, you will be able to make the claim. It may be a good idea to pay some of your students loans when you are in school. This can help to save a lot of money over the term of your loan, meaning there is less to pay later on. Both private and government sponsored loans can go with this kind of deduction.
There are some limits on how much you are allowed to claim. For most people, the limit is $2500 in interest each year. If you spend more money than this on interest over the year, you will not be able to claim all the extra amount. Even if you pay $5000 in interest, you will only be able to claim the $2500. In addition, if you spend $1000, you will only be able to claim up to the $1000 rather than the full amount. ‘
Even though this may not cover the full amount that you paid in interest on the student loans throughout the year, it is going to make a difference. This deduction can save you a lot of money and make it easier to work on the loans when you use the refund towards your loans later on. If you need help getting this all to work out or knowing how much you can take for the deduction based on your student loan payments, consider talking to your tax professional to get it done right the first time.
Other School Deductions
The student loan interest deduction is one of the biggest deductions that you can receive. But there are some other deductions that you can get based on your being in school. Unlike the student loan interest deduction where you will deduct the amount whether you are in school or not, these are only for those who are in school. It is possible to deduct the cost of tuition and fees, as well as the books and supplies that you need for classes, while you are in school.
To get these deductions, you will need to save all of your receipts to prove that you actually had these expenses. If you paid any tuition to the school, they will usually send you the right papers, but keep track of all the supplies to be safe. Do not try to claim the cost for housing or food as these are not counted in this kind of deduction and you can get in trouble for doing this. Bring all the paperwork into your tax professional to ensure that you are making all the right claims along the way and saving as much on your tax return as possible.
Going to school can be expensive and trying to keep up with all the expenses while studying and perhaps going to work at the same time is never easy. But when you bring in your information to a professional tax advisor, you will be able to get as much back in deductions as possible at the end of the year.
Kenneth M Perkins CPA/PFS