How Do Student Loans Affect My Taxes?

Posted on February 5, 2018 at 12:00pm by
We explain when you can discharge taxes in bankruptcy.

Our blog earlier this week talked about smart ways to use a tax refund. However, this blog also frequently discusses helpful tips for student loans. Now that tax season has begun, it is important to know how your student loans could affect your tax return. Depending on the circumstances, your student loan payments could even increase the amount you receive from your tax refund.

  1. You may qualify for a student loan interest deduction. Did you pay more than $600 in interest on your student loans during 2017? If you met this threshold, then your loan servicer should have mailed or emailed you a 1098-E form. In addition, the form is most likely available on the online portal your loan servicer uses. However, you must meet specific criteria to qualify for this deduction.
  2. REPAYE considers joint income while calculating your payments. If you are married and enrolled in REPAYE, an income-driven repayment program, then you should be aware that your payments could increase whether you are filing jointly or separately. REPAYE considers your spouse’s income when calculating your monthly payments. The PAYE and IBR programs do not consider joint income.
  3. The IRS has tax credits for education. There are tax credits that offset the costs of books, tuition and other educational expenses. You could check your eligibility for these benefits on the Federal Student Aid Tax credits could help you borrow less for higher education.
  4. Your tax refund can be garnished for defaulting. Have you defaulted on your federal student loans? If you have defaulted, the Department of the Treasury may offset your refund.
  5. You can use your tax return to recertify your income-driven repayment plan. If you are enrolled in an income-driven student loan repayment plan, then you must recertify your income once per year. You can recertify on the Federal Student Aid website by using your 2017 tax return information. Keep in mind, it can take more than a week for tax information to appear on the site after you have filed your return.

Questions About Student Loan Payments? Contact Our Kansas City Student Loan Lawyers

Student loans have become a major financial setback for millions of Americans. Recent studies suggest that student loan defaults are at an all-time high. Many others may be close to default because they are unaware of helpful debt relief or repayment options. If you have questions about higher education debt or debt relief, then please contact the Kansas City student loan lawyers at The Sader Law Firm for help.

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