Student Loan Interest

[Daddy]

My wife paid almost $4000 in interest for her private Sallie Mae loans in 2006. With our Federal loans added, we probably paid a total of about $5000 in interest. How much of this can be deducted on our taxes?

 

Thanks!

[Jeffmo32]

My wife paid almost $4000 in interest for her private Sallie Mae loans in 2006. With our Federal loans added, we probably paid a total of about $5000 in interest. How much of this can be deducted on our taxes?

 

Thanks!

 

Depends on your income level and a few other things.

 

I would need more information to help you out, like AGI, filing status. The deduction is usually phased out, but since this is one of those tax breaks that was just passed I haven't seen any information on the phaseouts yet. Not that I have looked, but I can.

 

Regards, Jeff

[Daddy]

Thanks Jeff. I appreciate it.

 

Let me give you as much info as I can (most are "guestimates"):

 

2006

My income: $30,000

Wife income: $5000

1 child

Married status

I'll file as HOH

[Jeffmo32]

Why HOH ?

 

Not to pry, are you considered unmarried for tax purposes ?

 

Regardless, at these income levels there is no "phaseout" of the student loan interest deduction. The total deduction available is $2,500 per return.

 

Say you file MFJ

 

Line 7 ---> 35K

 

SLD ----> <2.5K>

 

STDED ----> <10.3K>

PE -----> <9.9K>

 

Taxable Income ----> 12.3K

 

Tax -----> 1.23K

 

 

Give or take a few other factors.

 

Regards,

[Daddy]

Thanks again Jeff. Your assistance is TRULY appreciated.

 

I didn't understand all of the abbreviations you listed. I know MFJ is married fliling jointly, SLD is student loan deduction, but I didn't recognize the others . I know' I'm "slow" today. lol

 

Anyway, I will file MFJ. Don't know why I said HOH.

 

Forgot to mention, the first half of the year, I had 0 deductions. Last half I had 6. We only paid about $2000 in Fed. Income tax and about $2000 in Soc. Sec. tax. No state tax here in Florida.

 

Thanks again!

[Daddy]

One more thing, working off of your numbers, were you saying I'd owe 1.23K or get it back? Also, did you include the child tax credit?

 

Thanks.

[Jeffmo32]

The 1,230 was intended to be the tax due. You didn't give me your withholding, so I couldn't have figured your refund.

 

I'm sorry I didn't know if your child qualified for the Child Tax credit but you could knock off another $1,000 if he/she does.

 

Bottom line you won't pay much in tax. I'm thinking that the student loan interest carries forward for some reason, but I can't remember. Look it up at www.irs.com under publication 970. (hopefully they've updated for the new bill that passed)

 

Standard Deduction and Personal Exemptions are the abbreviations that I used.

 

Best regards and best of luck.

[Daddy]

Yes sir, my son does qualify!

 

Thanks again for your time!

[snkeskiner]

This year my AGI went from 36k to 62k. If you make over 50k you lose the $2500 max deduction and are stuck with $600 and change.