A great percentage of Americans benefit from various education loans to obtain useful academic qualifications. The loans are the bloodline that shapes their future, the future of their family and their country as well. But loan repayment can be an uphill process. It’s, therefore, wise to have a clear knowledge of the situation to avoid possible losses caused by ignorance.
The figures are quite scary. An astounding 40 million Americans are currently struggling to repay student loan debt, an amount that plays to the tune of $1 trillion. A Lendedu research reveals that amidst this worrisome struggle, a great majority of the students still don’t have a clear notion of how the student loans work. Most students can’t even tell the difference between federal and private loans. And particularly more concerning is the fact that the students don’t know how the loans are structured and how they accumulate interest.
Due to this lack of knowledge, many borrowers are likely unaware of the available tax break that states offer which may help relieve them of some of their burdens. Knowing these facts can save you a lot of money. Statistics reveal that most of this money goes unclaimed.
Borrowers can readily claim all of the chargeable interest on their loans up to an amount of $2,500. This works in the situation when your modified adjusted gross pay is $80,000 and you file individually, or $160,000 if you file a joint return with your spouse, whether you itemize or not.
Experts in this field can detail a simplified explanation of structure and figures.
“Falling into the 25% federal income tax bracket while you are absolutely up to date on your taxes qualifies you for a $625 tax refund,” explains Stephen Dash, the CEO of Credible, a multi-lender marketplace. Dash adds that, “Whichever option you have, you are assured at least to lower your taxable income”
In addition to your income, your marital status and the type or amount of loan, there are other requirements that have to be met in order that you qualify to receive the deduction.
- The loan must be paying your education, the education of your spouse or a person who was your dependent at the time you took out the loan.
- The beneficiary must be enrolled at least half-time in a learning program that leads to certificate, degree or any other recognized academic credential pursued from an eligible academic institution.
That means that many borrowers may not be aware of all of the tax breaks Uncle Sam offers that could help relieve some of the pressure on their bottom lines.
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Borrowers can claim all of the interest paid on loans up to $2,500 if your modified adjusted gross income is $80,000 if you file individually, or $160,000 if you’re married and file a joint return, even if you don’t itemize.
“If you’re up to date on your taxes and fall into the 25% federal income tax bracket that will translate into a $625 tax refund,” says Stephen Dash, the CEO of the multi-lender marketplace Credible, “At the very least, you can lower your taxable income,” Dash adds.
In addition to income, you and your loan must meet the following requirements to receive the deduction:
- The loan must be for you, your spouse, or a person who was your dependent when you took out the loan
- Enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential at an eligible educational institution.
To get a full understanding of how your student loans affect your tax bill, visit the IRS website.
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