What's Happening with Student Loan Interest Deduction for 2018?
Confused about what's going on with the student loan interest deduction this year? You're not alone.
Here's the deal. It seemed like this deduction was going to go away when lawmakers were working on the Tax Cut and Jobs Act of 2017. But when the bill was finally passed, lawmakers decided to keep this deduction in the bill. We repeat: you can still deduct your student loan interest!
Here's what you need to know about how to write off your student loan interest.
- You're not claimed as a dependent on anyone else's tax return
- Your filing status is anything but married filing separately
- You're legally obligated to pay interest on a qualified student loan
- You paid interest on a qualified student loan
- Your modified adjusted gross income must be less than:
|Filing status||phase-out begins||phase-out end|
Married FIling Jointly
|Head of Household||$65,000||$80,000|
How much can you write off?
Under the 2018 rules, you're allowed to deduct up to $2,500 as long as your modified adjusted gross income is below the phase-out for your filing status. If your income is above where the phase-out begins, but below where it ends then the amount you can deduct will be reduced depending on where your income falls. How do you know how much you paid? Your lender should send you a Form 1098-E that will show you exactly how much you paid in interest.
So, what now?
Chances are you're getting a bigger return. Woo! So, what now? Try making an extra payment on your student loan or save for your downpayment. It's one step closer to reaching your goals in 2019.