Millions of Americans may feel burdened after restarting student loan payments in 2023, but there may be an upside come tax season.
Interest on federal student loans began accruing again on Sept. 1 and the first payments were due in October for more than 40 million Americans. If you started repaying, you may be able to take a federal tax deduction on the interest of up to $2,500. And you don’t need to itemize to take it.
Make sure you know the income limits, who owns the loan and who’s making payments, and if your parents claim you as a dependent. That way you know who, if anyone, can take the deduction. Tripping up on any of these could reduce your tax deduction to zero.
What are the income limits?
The write-off phases out as your modified adjusted gross income rises. For tax year 2023, phase-out for single filers begins when modified adjusted gross income is above $75,000 and for joint filers over $155,000. It ends for taxpayers when modified adjusted gross income breaches $90,000 for single filers and $185,000 for joint filers.
Learn more: Best personal loans
Who can claim the deduction?
You can claim the deduction if:
◾ You aren’t married and filing separately.
◾ No one else is claiming you as a dependent on their tax return.
◾ You’re legally obligated to pay interest on a qualified student loan (your name is on the loan as owner or co-signor).
◾ You paid interest on a qualified student loan.
It’s important to note that “if the kid is…
