If you are like most students across the country and you are relying on loans to pay for your education, you are probably ready to get some good news! While you are likely dreading repaying your student loans, you might be surprised to learn that the interest you pay on your loans can be written off.
After you graduate and start repaying your student loans, you can reduce your taxable income by writing off the interest as an adjustment to income. You don’t even have to itemize deductions to write-off the interest.
In order to claim the student loan interest deduction, there are certain requirements:
- Only you can claim the exemption on your income tax return
- The deduction cannot be claimed if your filing status is married filing separately
- You are required by law to pay interest on a qualified student loan
- You paid the interest on the qualified student loan
Another tax consequence related to student loans occurs with loan forgiveness. If your student loan is forgiven by your lender, the charged-off amount must be included in your taxable income. In other words, you usually must pay taxes on the forgiven amount. This can cause tax problems for student loan borrowers, especially if the tax liability is significant.
The good news is that there is a bill called the “Relief for Underwater Student Borrowers Act” that would permit borrowers who have been rewarded with loan forgiveness “as the result of making consistent repayment towards their student loan debt an exemption from being taxed on the amount forgiven.” Thus, after having your loan balance forgiven after 20 years of consistently repaying your student loan debt, the bill allows you to avoid getting hit with an additional tax burden.
If you would like a down-to-earth approach and a lawyer who will listen carefully to all your questions and concern, call DeLadurantey Law Office, LLC,at (414) 377-0518. We serve clients primarily in the areas of student loan law, Chapter 7 and Chapter 13 bankruptcies, debt negotiations and defending foreclosure actions. If you live in the area of Milwaukee, Wisconsin, call us for the debt relief assistance you need. Visit our web site and like us on Facebook.