Student Loan Interest Tax Deduction and its advantages
Student loans: Your savior through college
No one can argue the fact that getting through your college is almost impossible without getting some help from student loans. After all, they help you to purchase your academic books, laptop or any other thing that you might feel the need to get while your time in college. However, the major problem that one faces is the paying back of these student loans with a fixed interest rate which is usually a lot. But you do not need to worry anymore because now there is a Student Loan Interest Tax Deduction which has been helping the students get lower interest rates on their loans and, in turn, have to pay less after they have completed college.
How does the Student Loan Interest Tax Deduction work?
There are several factors that need to be kept in mind before you find out more information about the deduction in student loans. Some of these factors have been mentioned below so you are more aware of the facts that come along with this tax deduction.
- The borrower can deduct a total of $2500 in the interest paid for the private student loans.
- There are also income limits that come with this tax deduction and you need to be aware about them before you move on with these steps. It works out this way: the single people who have a modified adjusted gross income (MAGI) of $65,000 and the married couples, who have filed jointly, earning $130,000 are usually phased out from this deduction. The single people who have a MAGI of at least $80,000 or more, and the married couples, who have filed jointly, with one of $160,000 or more, cannot claim for the deduction. This is usually the rule that works for the tax deduction.
- As you must know, the students who graduate usually have a time of about six months before they have to start paying the interest on the student loan they have taken. the value of that loan interest deduction won’t amount to much until the tax year following graduation. However, with time, the value decreases in the coming years as you pay off the loan and more of your payment goes toward the principal rather than the interest.
There are some other things that you need to look into, such as the company or lender you are getting the loan from so you do not regret this decision later on in life.
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