Paid student loan interest? Don’t forget about this tax credit

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If you’re a borrower who paid interest on a qualified student loan, it’s possible to deduct some or all of that interest on your federal income tax return with a special tax form for student loans.

To do so, you’ll need to acquire a student loan tax form commonly known as IRS Form 1098-E. You can use this form to report how much you paid in student loan interest. One copy will go to the IRS, and you’ll keep the other.

To learn how to get your hands on your student loan tax form, when to deduct student loan interest and how to file a student tax form, keep reading.

Related: Student loan refinancing pros and cons

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What Are the Tax Forms for Student Loans?

The IRS Form 1098-E is a tax form for student loans that’s sent out by your loan servicer, or the company that collects your student loan payments. Sometimes, your lender services their own loans. Other times, they hire an outside service to collect their payments for them.

The loan servicer is required to send borrowers a 1098-E to complete their taxes if the borrower owes at least $600 in student loan interest. Typically, they’ll get them out by the end of January, since the interest forms for student loans and tax season coincide.

If you have more than one loan servicer, you’ll receive a 1098-E form from each.

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The Purpose of a Student Tax Form

The student loan tax form is designed to give people with student loan debt the opportunity to deduct some or potentially all of the interest the debt accrues on their federal income tax return.

If you paid at least $600 in interest on a qualified student loan, the lender you paid that interest to should send you a 1098-E. Regardless of how many student loans you have, the $600 threshold still applies.

Recommended: What is the Average Student Loan Debt After College?

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Uses of a Student Loan Tax Form

The student loan tax form is used to calculate your student tax interest deduction on your tax return.

As long as you meet certain conditions, you may be eligible to deduct up to $2,500 in student loan interest from your taxable income:

  • You are filing separately and/or not married
  • Your income is below the annual limit
  • You are legally obligated to pay the interest, not someone else
  • If you’re filing a joint return, neither you nor your spouse is being claimed as a dependent on another person’s tax return

The eligibility for the student loan interest deduction is determined based on a borrower’s modified adjusted gross income (MAGI), or their adjusted gross income (AGI) after factoring in any tax penalties incurred and allowable deductions. At a certain higher income bracket, the deduction is reduced or eliminated:

  • For taxpayers filing as single: The deduction is reduced once they have $70,000 of modified AGI, and it’s eliminated at $85,000
  • For taxpayers filing jointly: The deduction is reduced at $140,000 of modified AGI, and it’s eliminated at $170,000

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Getting Your Student Tax Form

To obtain your college student tax form and ensure you aren’t missing any tax documents this season, there are a few steps you can take:

  1. Go directly to your loan servicer’s website, where a downloadable 1098-E form will likely be available.
  2. Contact your loan servicer via telephone if you’re unable to visit their website.
  3.  If you don’t know who your loan servicer is, visit StudentAid.gov or call the Federal Student Aid Information Center at 1-800-4-FED-AID, then complete Steps 1 and 2.
  4. Finally, note that student tuition tax form 1098-E is not available for download through the Federal Student Aid website.

There are plenty of useful tools on the site to get you where you need to go, but, ultimately, you can’t download your student loan tax form directly from the website.

If you have private student loans, contact your lender directly.

Recommended: What Is IRS Form 1098?

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Filling Out a Student Loan Interest Tax Form

When it comes to filling out a college student loan tax form, the IRS provides detailed instructions for the 2022 tax season to help financial, educational, and governmental institutions and borrowers cover all their bases.

At the most basic level, according to the IRS, if a loan servicer receives student loan interest of $600 or more from an individual during the year in the course of their trade or business, they must:

  • File a 1098-E form, and
  • Provide a statement or acceptable substitute, on paper or electronically, to the borrower

There are two boxes on the 1098-E form:

  • Box 1 is the amount of student loan interest received by the lender. It’s important to note, this figure represents interest paid, not loan payments made.
  • Box 2, if checked, denotes the fact that the amount in Box 1 does not include loan origination fees and/or capitalized interest for loans made before September 1, 2004.

Once you receive the 1098-E form, it’s up to you to include it when you file your taxes.

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When to Deduct Student Loan Interest?

Student loan interest tax deduction is a type of federal income tax deduction that lets student loan borrowers deduct up to $2,500 of the interest paid on qualified student loans from their taxable income. It’s one of many tax breaks available to students and their parents to help them pay for college.

To know when to deduct student loan interest, it’s important to know if you meet the necessary qualifications:

  • Your student loan was taken out for the taxpayer (you), your spouse, or your dependent(s).
  • Your student loan was taken out when you were enrolled at least half-time in an academic program that led to a degree, certificate, or recognized credential.
  • Your student loan was used for qualifying education expenses such as tuition, textbooks, supplies, fees, or equipment (not including room and board, insurance, or transportation).
  • Your student loan was used within a “reasonable period of time,” and its proceeds were disbursed 90 days before the beginning of the academic period in which they were used or 90 days after it ended.
  • The college or school where you were enrolled is considered an eligible institution that participates in student aid programs managed by the U.S. Department of Education.

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Do International Students Have a Different Tax Form?

For international students, it’s possible to deduct student loan interest from a foreign country, as long as their student loan is qualified (meeting the requirements listed above) and they’re legally obligated to make student loan payments on that loan.

There’s no need for international students to acquire a special international student tax form, however. The year-end financial statement from their loan servicer is typically sufficient enough proof for them to claim the student loan interest.

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The Takeaway

If you paid interest on a qualified student loan for yourself or a dependent, you can likely deduct that interest on this year’s tax return. Once you’ve determined when and whether you’re able to deduct student loan interest and how to file a student loan interest form, you can simply wait for your loan servicer to send along a copy of your 1098-E or visit their website.

When you work with a private student loan lender, you can access your 1098-E online, making it even easier to file your taxes and deduct student loan interest without waiting by your mailbox.

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