What is the Student Loan Tax Deduction?

student tax credits

The student loan tax deduction is your chance to get $2,500 off your interest payments. This is the maximum tax-deductible amount. There are strict limits involved with whether you can claim this credit, though, so you need to be aware of that.

For example, if you earn more than $135,000 as a single taxpayer, you’re not entitled to any deduction.

We’re going to answer some of the most frequently asked questions about this deduction and how to claim the student loan tax deduction.

What About Student Tax Credits?

student tax credits

There are student tax credits available, but you can only claim one of them. The two big student tax credits are the American Opportunity Tax Credit and the Lifetime Learning Tax Credit.

The American Opportunity Tax Credit provides you with $2,500, and the Lifetime Learning Tax Credit offers a credit of $2,000. But the American Opportunity Tax Credit has stricter requirements as you need to be studying towards a degree or certification and must be enrolled at least half time.

The Lifetime Learning Tax Credit only requires you to take a single course every year, and you don’t need to be studying towards a degree or certification.

Do keep in mind that you must be enrolled at a school eligible for the Federal Student Aid Program.

Are Full-Time Students Tax Exempt?

Not at all.

Full-time students are eligible for several tax credits and deductions, but you’re still required to report all earned and unearned income to the IRS.

Many students work half time jobs, and that income remains eligible to be taxed, even if you’re eligible for tax credits, and your actual tax burden is $0. Plus, by not filing, you may be missing out on a refund.

Don’t make this mistake, or you may find yourself being fined.

Other Student Tax Breaks and Write-Offs

In addition to the two primary tax credits for students mentioned above, there are a few other student tax breaks and write-offs available.

There’s the $2,500 tax credit for student loan interest payments mentioned before. You can also deduct $4,000 per year on your tuition fees.

It is recommended that you talk with your parents before claiming a credit, however. College students can usually take just one tax credit. However, the parents of college students can take additional tax breaks for you, if you fall within the relevant guidelines.

Try the Student Tax Deduction and Credit Calculator

Want to know how much you’re entitled to when it comes to student tax deductions and credits?

Make it easier with this education credit finder/calculator. Answer some basic questions, and the calculator will plug in the relevant information.

The calculator will tell you which credits you’re eligible for and how much you should get to maximize your tax refund.

Where Do I Get a Student Loan Tax Form?

The correct tax form for student loans is Form 1098-E. If you’ve paid more than $600, you’ll automatically receive this when the tax season begins.

There are other forms for claiming the relevant tax credits. The main one is Form 8863. You need to request this, however.

How to Claim Student Tax Credits and Deductions

The best way to claim your student tax credits and deductions is to use online tax filing. They have all the necessary forms, and they’ll be able to tell you which forms you need.

Just fill in your information, and it will populate the necessary forms for you.  You can also speak to a tax expert who will offer you advice and review your tax forms for you.