How Do Student Loans Influence Your Taxes?
20 December, 2021
Taxes are one of the most stressful things many of us have to deal with on a regular basis. If you're constantly dreading the moment when you sit down to file your tax return each year, you're not alone. There's a reason why so many people assign the task to a professional instead. Of course, if you're trying to save cash on your tax returns, handling them on your own could be an ideal option. The most important thing to remember in this case is you need to ensure you're taking advantage of all the various forms of tax relief available to you.
There are so many emerging banking technologies to be aware of that can impact the relationship between your taxes and your student loans. Today, we're going to be looking at the kind of tax relief available for people with student loans in the US. Notably, this is only one option you can look into when you're trying to reduce your overall tax bills, so if you're not sure what you're eligible for, make sure you consider talking to a professional.
Can I Claim Anything if I Have a Student Loan?
Getting a loan to go to college could be the main reason why you have a job to file your taxes for now. Unfortunately, while an education can help you to unlock a wide variety of new opportunities in your life, it can also be very expensive. The loans you rack up can continue to play a part in your budget for years to come, so it's important to know how you can deal with them. If you're in school and receiving money from loans, you don't need to consider this income, because you'll be obligated to pay it back later. If you're making payments on the cash you borrowed to go to school, then there are some deductible options available.
While you can't deduct the principal amount (the cash you borrowed initially for the loan), you can deduct a decent amount of intertest from your loan each year - sometimes up to USD 2,500. The amount you can remove will depend on a number of factors. Remember, the deduction available in this case is set so the more income you earn, the less you can write off. This means if you're a single head of household filer, your amount available to deduct will begin to reduce when your modified and adjusted gross income reaches around USD 70,000 per year. If you're filing your taxes jointly with a married partner, you can earn about USD 140,000 per year before you begin to lose student loan interest deductions, but you're still going to be limited.
Is It Worth Deducting the Allowance?
If you can apply to deduct a certain amount of the interest from your student loan from your taxes, then it's definitely worth looking into it. However, you can potentially save more each month by simply looking into refinancing your student loan into a new loan with a private lender. Switching to a different lender can save you a lot of cash on your loans. Using this strategy combined with deductions on your taxes can be an excellent way to save some extra money too. It's best to check all your options.
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