(UPDATE: The contest is now closed. We have our winner! See comments for more information.)
Students depend on their parents for a lot of things. But two who are at the top of the list? Laundry and money. Trust me on this: As a college student I piled my old Buick with dirty laundry a few times and drove it on I-40 to my mom’s house . I also relied on my parents to co-sign my student loans.
If you read the blog regularly, you know that I always pay off my school loans: I borrowed for college and for law school. I’ve paid off my undergraduate loans (thank goodness) but like many of my peers, my law school debt is still in the mix.
To help ease the pain of paying off all that debt, Congress has made it somewhat tax-efficient. This was not always the case: starting in 1986, you could no longer claim a deduction for interest paid for personal reasons (except for the deduction of mortgage interest). However, in 1997, under the Taxpayer Relief Act of 1997, interest paid on student loans was deemed deductible. To learn more about the history of student loans, see this previous article.
Today, a deduction is made to pay the interest on a student loan taken out to pay for graduate fees. The interest deduction on student loans is available even if you do not itemize. This is technically an income adjustment, but it is sometimes referred to as an âover the lineâ deduction since you are reducing your taxable income on the first page of your return without taking into account any deductions claimed on a schedule. A. Sounds good to you, doesn’t it? But there are a few rules and restrictions (it’s tax law, after all):
- There is a cap on the amount of interest you can claim each year. You can reduce your taxable income by up to $ 2,500 in eligible student loan interest per year. This amount includes both mandatory and voluntary interest payments – it’s not just what lenders want you to pay. The more you pay, the more you can deduct, assuming you don’t go over the cap.
- Your student loan must have been taken out only to pay for eligible educational expenses. This includes tuition and fees; books, supplies and equipment; and other necessary expenses such as transportation. Room and board may also be included if the cost does not exceed the room and board allowance included in the cost of attending your school for federal financial aid or the actual amount charged if you live in accommodation owned or operated by your school. .
- The loan should not come solely from the PHEAA or another institutional student loan organization. You can include other debt, like credit cards and line of credit IF you only use it to pay off student debt: in other words, don’t mix your education expenses with other expenses personal. Bank and other loans are also eligible, but the borrowed funds cannot come from a related person or be made under a qualifying employer plan.
- For the purposes of the deduction, the student who borrowed the funds must be you, your spouse or your dependent, and must have been enrolled at least half-time in a diploma program at the time the loan was granted. been contracted. For the purposes of the deduction, a person can be your dependent same if you are the responsibility of another taxpayer; same whether the individual is filing a joint return with a spouse and same whether the individual had gross income for the year equal to or greater than the amount of the exemption for the year.
- As with other educational tax breaks, you must reduce your eligible educational expenses by the total amount paid for the educational assistance provided by the employer; tax-free distribution of income from a Coverdell Education Savings Account or Qualifying Education Program (QTP); Interest on US savings bonds previously excluded from income; scholarships, scholarships and tax-free grants; and veteran benefits.
- You can usually deduct any interest you paid on your student loan until the loan is paid off. There are, however, limits and phase-outs, depending on your income. For 2014, the student loan interest deduction is phased out (reduced) if your modified adjusted gross income (RMAG) is between $ 60,000 and $ 75,000 ($ 125,000 and $ 155,000 if you are filing a joint return ); you cannot take advantage of the student loan interest deduction at all if your MAGI is $ 75,000 or more ($ 155,000 or more if you are filing a joint return).
- You cannot deduct interest from your student loan if you separately file a marriage declaration or if someone else is claiming an exemption for you on their tax return.
Oh, and one more thing (that’s the best part!): if someone else makes a payment on your behalf, it is treated for federal income tax purposes as if you made the payment. Yes, you read that right. If, for example, your mom and dad repay part of your loans, you can still claim the interest for the purposes of the deduction (but be careful and read the criteria above: if your parent claims you as a dependent but that you are legally obligated to repay the loan, then neither of you will be able to benefit from the deduction). Fantastic, right?
It’s always nice to have someone to help you, whether it’s helping you pay for your education or letting you use the washer. And that brings us to the next giveaway. A reader will receive a laundry basket filled with laundry and cleaning products from
CloroxÂ® disinfectant wipes
CloroxÂ® 4 in One Disinfectant Spray
CloroxÂ® Glass Wipes
To look for
Clorox 2Â® stain remover and color enhancer
To enter to win, just post a comment below telling me your favorite piece of clothing to wear to college – you know, the one that was your “go” for everything. I’ll go first: I had an oversized gray Meredith College sweatshirt that went with everything. Or so I thought.
Entries should be posted in the comments section of this blog post in the space below by 10:00 PM EST on September 21, 2014. It’s that simple. I will choose a winner at random (using a number generator) from all eligible entries.
Be sure to read the fine print for more rules because as you know I’m a lawyer and I love the rules:
Don’t panic if your comment doesn’t appear immediately. If it switches to moderation because, for example, you’re new here, it’s the timestamp of your comment that matters. If you are having trouble signing up, please email email@example.com and copy me (firstname.lastname@example.org) so I can help if I need / could.
I like my
followers and my Facebook fans but for this particular giveaway, Facebook tweets and comments will not be counted. Ditto for emails. You must leave your blog comment to this article.
You can enter as many times as you want, but you must leave a different answer each time you comment.
Offensive comments or comments that otherwise violate the comments policy will be removed and will not be considered valid for the purposes of the contest.
Likewise, pingbacks and other links will be ignored for the purposes of the contest.
I’ll need your full name and email address: be sure to use your real information when signing up to leave a comment. I will not publish your email address, but I need the contact details of the winning entry. If you win and I can’t reach you, it’s a forfeit.
Due to shipping considerations, you must have a valid address in the United States. Sorry, Canada, huh?
I respect your privacy and will not send you anything unrelated to your participation in this contest. By entering the contest, you agree that I may post all or part of your entry, including your name, as part of the contest announcements or promotions, except for your email address.
Like Judge Judy, my decision is final.
Prizes are provided directly by our sponsors and are not exchangeable or exchangeable for other prizes. Sponsors do not pay for placement and receive no compensation for contributions – neither do I. I have no affiliation, paid or otherwise, with any of our sponsors.
If you are not allowed to participate in giveaways because of the laws of your state or your age or an agreement you have made with your mother, consider that this giveaway does not apply to you. In other words: void where prohibited or restricted.
Finally, the gift is on me, me, me. It is not affiliated with or endorsed by Forbes. So leave them out, okay?
Comment! And thank you for participating in the start of the 2014 school year!