If you are like two thirds of college students and graduated with student loan debt, we have some good news. Student loan interest is tax deductible provided it meets certain qualifications. You can claim a deduction of student loan interest if:
- You paid interest on a qualified student loan in tax year 2012;
- You are legally obligated to pay interest on a qualified student loan;
- Your filing status is not married filing separately;
- Your modified adjusted gross income (MAGI) is less than a specified amount which is set annually.
For 2012:
- For married filing jointly your amount is $125,000. (Phased out between $125,000 and $155,000)
- The MAGI amount is $60,000 for all other filing statuses. (Phased out between $60,000 and $75,000), and
- You and your spouse, if filing jointly, cannot be claimed as dependents on someone else’s return.
The other limitation is on the size of the deduction you can claim. It is limited to a maximum of $2,500. Loan origination fees can be treated as interest if it is for the use of money rather than for property or services. Typically, loan origination fees are not included in interest or statements. Any reasonable method can be used to allocate it over the length of the loan. Capitalized interest is also treated as interest for tax reasons and is deductible as payments are made on the qualified loan. Interest on a credit card may count in some circumstances provided that the card was used for qualified educational expenses only.
For more information on itemizing deductions, please contact Henssler Financial Tax & Accounting Division at 770-426-9166 or e-mail us at experts@henssler.com.
Disclosures
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
