We've sure heard a lot about student loans this year. 🎓 From false forgiveness promises to turning payments back on, we're ready to get off this crazy coaster! 🎢
If you have student loans, don't forget about them during tax time. Depending on your unique circumstances, you could wind up saving (or owing) big on this year's return. 💰
Here’s Five Fast Facts on student loans and taxes:
- 📬 Snail Mail - Keep your eye out for a 1098-E to come in the mail. Your loan servicer will send this form to detail how much interest you paid throughout the year. Under current tax law, you can potentially deduct up to $2,500 in annual interest on your tax return.
- 💲 Tax Free - Federal and private student loans aren't taxable because they are repayable. Additionally, scholarships and grants for tuition, books, and supplies are typically tax-free. However…
- 🧐 The Fine Print - … some scholarships used for expenses outside of tuition (like room and board) may be subject to taxation. If you get tuition assistance through your employer, it could be taxable as well. The same goes for certain student athlete stipends. When in doubt, double check with a qualified tax accountant.
- 🤝 A Little Help - If you received student loan forgiveness under the American Recovery Act, the assistance is generally tax-free at the federal level. However, check the tax laws in your state because you may be taxed at the state level.
- ✅ Extra Credit - Looking for more student loan assistance aside from deductions? Check your eligibility for related tax credits. Both the American Opportunity Credit and Lifetime Learning Credit allow you to claim expenses for education. These credits could result in a refund or help reduce your tax bill.
🔥Bottom line: Depending on your personal financial situation, deducting student loan interest payments or qualifying for tax credits could result in significant tax savings. Check in with an experienced tax professional before you file to ensure your return is correct! Speaking of college, are companies doing away with degree requirements? Find out here!
Are you ready to file your 2023 taxes?
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