With the fall semester of college beginning, many of us have tuition and student loans on our minds. Here at Wall Titus, we strive to help parents and students manage these expenses in the best way possible. For today’s Wall Titus Tip, we’d like to share some insight on student loan interest tax deductions.
Generally, you can deduct mortgage or student-loan interest only if you are legally required to repay the debt. But if parents pay back a child’s student loans, the IRS treats the money as if it were given to the child, who then paid the debt. So a child who’s not claimed as a dependent can qualify to deduct up to $2,500 of student-loan interest paid by Mom and Dad. And he or she doesn’t have to itemize to use this money-saver. (Mom and Dad can’t claim the interest deduction even though they actually foot the bill because they are not liable for the debt.)
For more information on student loans, tax deductions, or other financial tips, feel free to contact us!