There are many of benefits that are associated with student loans. Most students get student loans because they provide an option for paying for the often large cost of higher education. Lost in that fact is the knowledge that student loans have excellent tax implications.
The federal government is taking big steps to ensure that all students have a chance to get a college degree if they have the ability. Because of that, there are tax rules associated with student loans that can put you on stable financial footing going into the future. What tax benefits are available to those people with student loans? That depends upon how much income you are bringing in.
If you have a modified adjusted gross income (MAGI) that is less than $65,000, then you are entitled to a beneficial tax break. For those folks with a joint tax return, the maximum MAGI is $135,000. If you happen to fall into that category, then you can get a deduction of up to $2,500 for your student loan. This means that you can report $2,500 less dollars of taxable income at filing, which will ultimately save you hundreds of dollars in the long run. There are certain conditions that you must meet in order to qualify for these special tax breaks.
The only way to earn a tax deduction is if your student loan was taken out in order to pay for certifiable student expenses. Since some private student loan lenders will give money to students for other things (such as cars, food, etc.), it is important to make sure that your loan was used for only housing, tuition costs, or books.
The nice thing about these tax benefits is that you can stretch them out for a reasonable period of time as you pay off the loan. Student loans are quite popular because of the low interest rates and the low pressure nature of their repayment terms. As you get out into the working world and start to make a dent on the balance of your student loan, you will be able to save money through the presented tax benefits. If you are smart with your repayment plan, you can make that tax break last for as long as possible.
It is important to consult your accountant or tax professional in order to find out what other deductions you might qualify for. Student loans come with a whole assortment of different benefits, especially if they are granted by the federal government. Tax professionals are sometimes able to find things that you did not realize were there. In addition to the up to $2,500 that you might be able to deduct, there could be more benefits to help bring down the amount of money that you pay back to the government. That knowledge, along with the fact that student loans have a great deal of value based upon their interest rate, makes this type of college financing a virtual no-brainer for students.
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