Student loans and taxes

[cotterpin]

I just took out my first student loan (stafford) in over 10 years, and I know alot has changed.

 

Is this income I have to claim on my tax returns? I also heard from someone that the interest is tax deductible (dunno if that's true...)

[ziggypop]

I just took out my first student loan (stafford) in over 10 years, and I know alot has changed.

 

Is this income I have to claim on my tax returns? I also heard from someone that the interest is tax deductible (dunno if that's true...)

 

No, it's not income since you aren't "gaining" anything (in other words, since you have to pay it back). The interest is taxable, but only when you pay it, not as it accrues (which maybe is what you're asking -- sorry if I misunderstood you). It's a sliding scale depending on your AGI when you file -- the more you make, the less you can deduct. I think it's somewhere around $65,000 for a single person when it phases completely out.

 

Hope this helps!

[cotterpin]

sorry for being a dolt...

 

so does that mean I claim the interest as a deduction once I begin to pay it?

 

It is a deferred loan but I do have the option (and intend) to pay the interest on it when I can (it's unsubsidized, and I don't want 5 years of interest added on if I can help it)

 

If I make payment on the interest this year, do I claim that on my taxes for this year?

[direred]

And, at the risk of pointing out something not entirely obvious, if you capitalize interest on unsubsidized loans and then consolidate, that's not the point when you get to deduct the interest.

 

So says the audit on my tax return, just so you know. I called and asked the IRS, my original lender and the consolidating lender and none of them knew.