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Tag: tax reduction

How Student Loans Can Affect Your Taxes

Family in Litchfield, NH Has New College Student and Questions

The interest paid on student loans can be taken as a tax reduction, reducing the taxable income. Using Form 1098-E, which is sent by the lending institution at the end of the year, you can deduct up to $2,500 in annual interest on these loans. This tax deduction applies to all loans used to pay for higher education, not just federal loans. This tax break is an above the line deduction that can wind up saving you a few hundred dollars. However, to qualify for this deduction you must have paid the interest. Those who have their payment paused on an interest waiver are not eligible.

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