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Your Student Loans Can Actually Save You Money

For most people, student loan interest is crazy ex that they want to avoid, but if you’re in the process of repaying your student loan debt, you may be eligible for a tax break.

I know first hand that student loans and being in debt is a STRESSFUL burden, but I personally have been able to reduce my taxable income by reporting the amount paid on student loan interest on my taxes.

Student Loan Deduction

Depending on your income and your tax filing status, you may be able to deduct up to $2,500 of interest from your annual taxes. For example, if your annual taxable income is $45,000 and you paid $3,250 in student loan interest last year, you can only deduct $2,500 from your taxable income amount. This will bring your taxable income down to $42,500.

If you are a single filer and your modified adjusted gross income (MAGI) is less than $70,000, you can claim the student loan interest deduction. If your MAGI is $70,000 to $85,000, you can still take advantage of a partial deduction, but if your MAGI is $85,000 or more, you cannot deduct student loan interest from your taxes. But, the bright side is that if you’re making this kind of money then you’re doing pretty damn well for yourself!

The great thing about claiming the student loan interest deduction, is that you don’t need to itemize your tax return in order to clean it. You can take the standard deduction and still utilize the student loan deduction to reduce your taxable income.

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How much can I claim?

Your student loan is your will provide you with a form 1098-e which summarizes your interest paid for the year. Usually, you’ll form 1098-E if you paid more than $600 in interest, but you can still claim the deduction if you paid less than that, you’ll just need to contact your lender to confirm the total interest paid.

Paying off debt can be challenging, but you have to do it! After all, it is your responsibility to pay back the money that you owe. Reducing your tax bill or increasing your tax refund is an awesome perk when you’re on the road to becoming debt free.

Speaking of tax refunds… What will you do with your refund?

(Hint: Your answer should be save, invest, or use the money to pay of debt)

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