Having student loan debt is stressful enough without having to worry about how it affects your taxes. So, we’ve put together the top five student loan tax tips for you. Now you will have a heads up on what is coming your way and can avoid any pitfalls.
1. Your student loans could be tax deductible
Although this doesn’t apply to everyone with student debt, particularly people with higher income, if you have been paying toward your loans you could possibly claim a portion of its interest as a deduction. Your lender should be sending you a “1098-E” statement, revealing how much interest you paid, and you could receive a generous deduction.
2. Qualifying for tax credits for higher education expenses
Which brings us to our next tip, checking if you qualify for the American Opportunity Credit can result in $2500 per year (for your first four years of college) in tax credits.
As long as you meet these requirements you should be eligible:
- You are filing “single.”
- In 2018, you paid on your student loan.
- You were required by law to pay interest on your student loan.
- Your gross income is less than $70,000.
- You are not being claimed as a dependent.
3. Be sure to consider the government shutdown
Before you put off requesting any documentation needed to file your tax return, consider that the government’s lack of staff and the extra time it could take after you request a copy of your tax transcripts. Not only could copies of tax returns get delayed but the U.S. Department of Education website tools have been reportedly having issues. So, we recommend getting a jump start to accommodate any of these delays.
4. People that are in default of their student loans
If you are in default for a student loan, take care of it before filing your taxes. The “Treasury Offset Program” says that the government is within their rights to intercept refunds for people who are in default. This means they can take your tax refund and put it toward federal student loans in default. However, luckily, they cannot put it toward any collection charges or penalties only your principal loan and interest.
5. Make a Tax Appointment
Make the most of your options by speaking with a tax professional. These laws can be tricky and difficult to understand on your own. We are here to help and answer any questions you may have. Don’t let a misunderstanding cost you.
We hope these tax tips serve you well this season and ensure a smooth tax time. To get into contact with one of our professionals call 970-378-4830 or visit yeaterassociates.com to see how we can maximize your tax season.