The Process of Minimizing Tax Returns
Claiming an interest payment deduction would help you decrease your taxes. Those who are shouldering the burden of student loans would hardly want to add to the worries by requiring paying interest on the repayable amount to the government. Fortunately, it is possible in several cases to deduct the interest applicable on student loans. This is not a very difficult process provided that you fulfill the prerequisites for claiming the aforementioned deduction on your taxes.
The first step towards this would be to have the correct filing status, which, in this particular case, implies that every kind of filing is applicable other than being married and filing taxes separately. The reason for exemption of this status is not very clear; however, to avoid wasting time filling out a deduction which you are not eligible to claim, you should take note of this rule.
You should also remember that you are not eligible to claim a deduction in case you claim to be another individual’s dependent or associated with tax exemption on their tax forms. This should be easy for those who have graduated from college and in the process of repaying their education loans. Even then, it is wise to make absolutely certain that no second person claims you as tax deduction in their own forms.
Moreover, you are eligible to claim deduction of taxes only after you have paid the applicable interest on your education loan. This is applicable only in cases where you are the sole individual to have any obligation to repay the loan. This means that in case you are liable to pay interest on a loan amount that both you and your parents are obliged to repay, or a parent PLUS loan, you are not eligible to claim this particular deduction.
In case you are paying interest on an education loan made in the name of a dependent of yours, you are eligible to claim the interest as a deduction. However, it should be remembered that this claim for deduction holds ground only if you are the person responsible for repaying the loan. In this case, you would also be required to claim an exemption based on your tax return.