OK, so you’re at your first job, and it’s tax time!
Did you remember you took out a student loan?
Well, the interest on that loan is a tax deduction!
In the article below, I’m going to get into the nitty-gritty of taxes and explain more.
However, remember that when filing time comes, you may want to get an actual accountant to help you.
After all, this is the IRS telling you what’s up, so there’s no guessing!
Make Taxes Your Friend Through a Student Loan Tax Deduction
First things first, while you unfortunately cannot write off your student loan payments, you can write off the interest.
For example, my student loan interest write off totals my yearly payments.
That means I nearly break even on my payments, tax wise.
This goes to show that the tax laws can work harder for you, but it helps if you get professional help!
While the IRS may be an infamous bad guy in most people’s mind, you can maximize their rules in your favor, if you know how.
For example, if you made federal student loan payments in 2016, you may be eligible to deduct a portion of the interest paid on your 2016 federal tax return.
This is known as a student loan interest deduction.
Don’t miss out on this opportunity to make the money you’ve paid work for you!
Learn more about reporting student loan interest payments from IRS Form 1098-E on your 2016 taxes and potentially get this deduction.
You can even do it next year!
What is IRS Form 1098-E?
IRS Form 1098-E is the Student Loan Interest Statement.
Your federal loan servicer will use this to report student loan interest payments to both the Internal Revenue Service (IRS) and to you.
Will I receive a 1098-E?
If you paid $600 or more in interest to a federal loan servicer during the tax year, you will receive at least one 1098-E.
The IRS only requires federal loan servicers to report payments on IRS Form 1098-E if the interest received from the borrower in the tax year was $600 or more.
However, some federal loan servicers still mail 1098-Es to borrowers who paid less than that.
Check with your accountant!
If you paid less than $600 in interest to a federal loan servicer during the tax year and do not receive a 1098-E, you may contact your servicer for the exact amount of interest you paid during the year.
Then, you can report that amount on your taxes.
How many 2016 1098-Es should I expect to receive?
That depends on how much you paid in interest, how many federal loan servicers you had, and some other factors.
Read through the scenarios below to find where you fit and know how many 2016 1098-Es you should expect.
Again, I cannot stress enough how much you need an accountant or other professional help!
- Your current servicer was your only servicer in 2016: In this case, your current federal loan servicer will provide you with a copy of your 1098-E if you paid interest of $600 or more in 2016. Your servicer may send your 1098-E to you electronically or via U.S. mail.
- You had multiple servicers in 2016: In this case, each of your federal loan servicers will provide you with a copy of your 1098-E if you paid interest of $600 or more to that individual servicer in 2016. Your servicer may send your 1098-E to you electronically or via U.S. mail.
If you paid less than $600 in interest to any of your federal loan servicers, you may need to contact each servicer as necessary to find out the exact amount of interest you paid during the year.
How will reporting my student loan interest payments on my 2016 taxes benefit me?
Reporting the amount of student loan interest you paid in 2016 on your federal tax return may count as a tax deduction.
A tax deduction reduces the amount of your income that is subject to tax, which may benefit you by reducing the amount of tax you may have to pay.
Now that you know student loans, interest rates, and taxes aren’t as scary as you may have originally thought, you are ready to report your student loan interest rates on your 2016 federal tax return.
This all applies even if you got an extension!
What if I still need help or have more questions?
While I am not a tax advisor and cannot advise you on your federal tax return questions, your federal loan servicer is available to assist you with any questions about your student loans.
This includes questions about IRS Form 1098-E and reporting the student loan interest you’ve paid on your 2016 taxes.
If you’re not sure who your loan servicer is, visit the Loan Servicers page to find out. Good luck!
Have you gotten a student loan tax deduction in the past? Have any tips in general for those doing their taxes? Leave a comment below!
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