25 Feb Student Loan Interest Deduction in 2020
If you have student loans and regularly pay, you are familiar with the Student Loan Interest Deduction. You usually get to subtract up to $2,500 a year in interest payments on federal student loans, reducing your tax liability. Being an “above the line” deduction, meaning you don’t need to itemize to qualify, is a welcome break for many taxpayers. But, there is some bad news this year….
Always: Make more than the income threshold, for 2021 anyone making more than $85,000 or couples making more than $170,000
Due to COVID: If you paused making payments on your loan due to COVID permissions, the government paused interest accrual. Good thing, but that means you didn’t accrue any new interest to deduct.
Oh No! I was looking forward to this!
This interest pause started March 13, 2020, so payments made prior to that are still eligible for the deduction. Unfortunately, even if you continued to make payments while the interest accrual was paused, you don’t have interest to deduct. For those with private loans or FFEL loans, you likely were still paying interest, so payments to those would be eligible for the deduction.
How do I know what I can deduct?
Your lender will report your interest payments to the IRS on form 1098-E and send you a copy. You will claim this deduction on line 20 of your Schedule 1.
Need help on this? Not see your 1098-E come in? Call us to set up an appointment and one of our accountants can take this stress off your hands!