Comments on: Student Loan Interest – It’s Deductible!

By: Hannah

Hannah — Mon, 06 Feb 2012 21:26:19 +0000

I have the same situation as Alan and would love an answer.

I co-signed my ex’s loan and have been paying it for 3 years. I do deduct the interest, but someone recently told me that I shouldn’t be. I can’t find a clear answer on this. I am the co-signer and I paid the interest – why shouldn’t I deduct it?

Aren’t I legally obligated to make these payments? Because if not, maybe I’ll just stop paying the damn thing.

By: Alan

Alan — Fri, 05 Feb 2010 23:17:41 +0000

I am a co-signer of the loans that my spouse (now ex) have never paid a single cent on. We got divorced on the 29th of Dec 09 so my filing status is single. I have started paying 13 months ago and the 1098-E form list her name only. How can I get away with claiming the deduction? I have all the evident that she has not pay anything since the beginning and I think IRS should be understandable in types of cases but what is the right thing to do?

By: Elaine

Elaine — Fri, 05 Feb 2010 00:53:45 +0000

Question to Meagan, have your parents been able to deduct the interest after all? I’m asking because I’m in the similar situation except my children were indeed claimed as dependents on my 1040.

By: My Journey

My Journey — Mon, 14 Sep 2009 01:33:17 +0000

Kelly,

No one in my Bursar’s office EVER told me that the interest on student loans was only tax deductible depending on what I made. I was pretty pissed when I did my 2007 taxes and I was a first year associate, and couldn’t fully deduct my interest and I didn’t even get one of those crazy six figure jobs!

http://www.myjourneytomillions.com/articles/education-loan-interest-not-always-tax-deductible/

By: Roth & Company, P.C.

Roth & Company, P.C. — Fri, 11 Sep 2009 12:17:06 +0000

Silver linings…

Student loan debt is no fun, especially if you are coming out of college to the bleakest job market in……

By: Kelly

Kelly — Fri, 11 Sep 2009 11:54:11 +0000

My guess – and I haven’t seen your actual correspondence – is that the problem has to do with the notion that the loan was not in the name of your parents. A co-signer is not the owner of the loan and many loan service companies, such as AES, will not issue a 1098 in the name of a co-signer. Technically, however, I believe the IRS should still allow your parents to claim the interest if the loan was incurred while your siblings were still dependents. If your parents did not claim the students when the loans were taken out and paid the interest, they would not be able to deduct the interest.

That said, there are other exceptions, too, which might apply, such as whether the interest was used for qualified education expenses, etc. If you’re still stumped, consider having a tax pro take a peek.

By: Meagan

Meagan — Fri, 11 Sep 2009 03:11:32 +0000

Here’s a question – my parents pay the loan interest on loans taken out while two of my siblings were their dependents. My parents are cosigners on the loans. In 2008, my parents deducted the loan interest (because they paid it) on their return. My siblings were no longer claimed as dependents by my parents in 2008. The IRS disqualified this loan interest deduction. From my reading of the Code, I believe this is deductible. We drafted a letter and again were denied. Am I missing something?

By: Mary Kay Foss

Mary Kay Foss — Fri, 11 Sep 2009 00:38:36 +0000

Another interesting thing is that the interest is deductible by the person named on Form 1098-T. If the parents paid the interest and get Form 1098-T they’re likely to have too much income for the deduction. My daughter tells friends that she has a long-term relationship with Sallie Mae. We handled the bachelor’s degree but Sallie helped her get two masters.

By: Adam

Adam — Thu, 10 Sep 2009 23:27:31 +0000

Like you said, the loan must have solely used for qualified higher education expenses. How many people do you think deduct the interest even though they used the money for something else? According to the Code, if you take out $100,000 in student loans and use $1 of those loans to pay a tip at a bar, ALL of the loan interest is disqualified.

Just an interesting tidbit that gets overlooked quite often. Could you imagine being audited and having to prove each dollar of your student loans was used for qualified higher education expenses?