Student loans make higher education more affordable for many. However, navigating the tax implications may seem complicated for those who are just starting to manage their finances. If you’re a student or recent graduate, review the following before turning to professional tax services.

What You Need to Know About Student Loans During Tax Season

Are student loans tax deductible?

Student loans themselves are not tax deductible, but the interest you pay on them is. This option applies to all types of student loans, not just federal ones. It's also available even for those who use the standard deduction.

Who’s eligible to deduct student loan interest?

The deduction on interest may be an option if you took out a loan for yourself, a spouse, or a dependent and used that loan exclusively for higher education. However, you must also have an adjusted gross income that's less than $85,000 or $170,000 for married couples filing jointly to qualify. Those who have adjusted gross incomes of $170,000 or more may only receive a fraction of the tax credit.

What happens if a student loan is forgiven?

The amount that's forgiven may be taxable in the year the forgiveness is granted. However, this depends on the type of forgiveness program. Generally, if the student has to meet specific criteria, such as working in a particular field for a certain number of years, the amount received may not be considered income and thus would not be taxable.

Are there any tax credits for student loans?

The American Opportunity Tax Credit allows qualified students to claim up to $2,500 per year for the first four years of their schooling. Additionally, the Lifetime Learning Credit offers up to $2,000 in tax credits for various educational expenses, including tuition, books, and equipment purchased from the school.

If you’re looking for professional tax services to help you make sense of your student loan options, contact Tostrud & Temp, S.C. in La Crosse, WI. This financial accounting firm has more than 35 years of experience helping businesses and individuals manage their finances. From tax services to public accounting, their team provides individualized insights and support based on each client’s unique needs and goals. Visit them online today to learn more about how they can help, or call (608) 784-8060 to request a consultation.