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A taxpayer who paid
interest on a student loan may be able to claim a tax deduction up to
$2,500.
The deduction is phased out for individuals filing single tax returns with
income of $65,000, and for couples filing joint tax returns with income of
$130,000.
However, the
deduction is only allowed for a taxpayer claiming the dependency exemption
for the student. If the parent paying the student loan transfers the
dependency exemption to the other parent, neither parent can claim the
student loan interest deduction.
For married
taxpayers, even if they are separated, a joint tax return must be filed to
claim the deduction. The only exception is for separated individuals
qualifying as head of household under the abandoned spouse rule.
For those saving
and/or paying for college, proper tax planning may help maximize the
resources needed for college.
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