Are student loans tax deductible?
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The complicated system of student loans is often extremely confusing for college students, and adding the equally complicated system of taxes into the mix just makes things more frustrating when it comes to the issue of if student loans are tax deductible.
The short answer is that there are opportunities to count your student loan payments as a tax deduction on your annual federal income tax return, though there are some limitations.
This article aims to clear away some of the confusion, providing clarity for college students about the process and filing status of their taxes and federal student loans by consolidating information and presenting it in a clear format. By the time students have finished reading this article, they will be better equipped to file taxes.
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How much of student loans are tax deductible?
Students who are currently enrolled in an institute of higher education and are receiving student loans, will not see a difference in their tax return because a student loan is not considered taxable income due to the fact you must pay it back.
Additionally, the initial amount of your student loan is not eligible for tax deductions. The student loan interest that accumulates once you start making federal student loan payments is eligible for tax deductions up to a certain amount. The student loan interest deduction can reduce your taxable income by up to $2,500.