Wednesday, March 26, 2008

Student Loan Interest Deduction

On your 2011 tax return, you may be able to deduct up to $2,500 of the interest you paid on a qualified student loan for yourself, your spouse or your dependent. Generally, you can claim the deduction if all of the following requirements are met.
1. Your filing status is any filing status except married filing separately.
2. Your modified adjusted gross income is less than $61,000 for single, head of household and qualifying window (er) ($122,000 for married filing joint return).
3. No one else is claiming an exemption for you on their 2011 tax return.

You paid interest on a loan taken out only to pay tuition and other qualified higher education expenses for yourself, your spouse, or your dependent when the loan was taken out. The term dependent includes someone you could have claimed as a dependent for the year the loan was taken out except that:
1. The person filed a joint return,
2. The person had gross income that was equal to or more than the exemption amount for that year ($3,700 for 2011), or
3. You could be claimed as a dependent on someone else's return.

Qualified Loan
The loan is not from a related person or borrowed under a qualified employer plan or a contract purchased under such a plan. The education expenses were paid or incurred within a reasonable period of time before or after the loan was taken out. The person for whom the expenses were paid or incurred was an eligible student. However, a loan is not a qualified student loan if any of the proceeds were used for other purposes.

Qualified Education Expenses
Qualified higher education expenses generally include tuition, fees, room and board, and related expenses such as books and supplies. The expenses must be for education in a degree, certificate, or similar program at an eligible educational institution. An eligible educational institution includes most colleges, universities, and certain vocational schools.

You must reduce the expenses by the following benefits
1. Employer provided educational assistance benefits that are not included in Forms W-2, box 1.
2. Excludable U.S, series EE and I saving bond interest from Form 8815.
3. Any nontaxable distribution of qualified tuition program earnings.
4. Any nontaxable distribution of Coverdell education saving account earnings.
5. Any scholarship, educational assistance allowance, or other payment (but not gifts or inheritances, etc.) excluded from income.

Eligible Student
An eligible student is a person who:
1. Was enrolled in a degree, certificate or other program (including program of study aboard that was approved for credit by the institution at which the student was entrolled) leading to a recognized educational credential at an eligible educational institution, and
2. Carried at least half of the normal full-time workload cod for the course of study he or she was pursuing.

Claiming Deduction of the Tax Forms
Use the worksheet in the Form 1040NR or Form 1040NR-EZ instructions to figure the deduction. The student loan adjustment is on line 32 of 1040NR and line 9 of 1040NR-EZ. Line 33 of Form 1040.

List of Articles
Your Filing Status
1. Filing Status for Married
2. Filing Status: Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. Filing Requirement for a Dependent
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent
3. Filing W4 Employee’s Withholding Allowance Certificate
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Exemptions and Deductions
1. Moving Expenses
2. Itemized Deductions
3. Student Loan Interest Deduction
Income Adjustments -- Retirement Plans
1. Trad IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
Status of Your Tax Refund
1. When will I get my tax refund?
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2008 Economics Stimulus Act
1. Are You Eligible for 2008 Stimulus Tax Rebate Payment?
2. 2008 Economics Stimulus Act -- Benefits to Businesses

Tax for Aliens
1. U.S. Tax Filing Requirements for Non-Residents
2. Substantial Presence Test
3. Social Security and Medicare (FICA) Taxes for Non-resident Exempt Individual
4. U.S. Tax Treaties for Professors, Teachers and Researchers
5. U.S. Tax Treaties for Students and Apprentices
6. Mandatory Reporting of Foreign Bank and Financial Accounts

Any Question?If you have a question, send me an email:
Forum for India Taxes:

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