Studying in the USA can be extremely expensive, but the quality of education is so good that lakhs of young students still opt to study there each year. Most young students have to take a student loan from a bank to fund their education, and depending upon the interest rates and monthly payments, it can take years for the student to pay them off completely.
Most people write a check every month to their banks in the process of paying back their student loans. However, many people don’t know that you can get a tax break, which can be very advantageous for you! Thankfully, student loans interest tax-deductible in the USA!
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An income tax deduction that allows you to subtract about $2,500 from your taxable income if you have paid any student loans is called student loan interest deduction. It is advantageous for students or their parents (whoever is paying back the student loans) to know about this because, more often than not, people don’t even realize that they can save this huge amount of money every year!
Read More: What is Student Loan Forgiveness in the USA?
The answer to this is yes! Student loan interest is tax-deductible in the USA, and many people end up missing this great opportunity to save some money! Of course, you need to figure out first if you qualify for student loan interest deduction or not. Here is how you can find out:
Your student loan interest deduction is something you can claim without itemizing, although many people still choose to itemize it. That is your choice. You need to attach a document called Schedule 1 to your tax return when you are doing this.
Read More: Are Student Loans Possible to Get for International Students?
Another important document which you need to know about is the 1098-E Student Loan Interest Statement. This document will come directly from your loan provider. In case you have taken student loans from multiple providers (as long as they are not personal loan providers like family, relatives, or an employer), you need to receive this statement from each of your loan providers.
You will most probably receive this document in your email, after which you can download a copy of it. In case you don’t get one in your email, you can log into the website of your loan provider and download a digital copy.
You can then use the help of services on the internet or a professional to calculate your deduction.
Read More: How Long Does It Take to Pay off Student Loans?
In case you are filling out your form by hand, you can calculate the deduction yourself. Here is how you can do it:
Read More: How to Apply for a Loan in the US as a Foreign Student?
Many people either are not aware of the student loan interest deduction or are not bothered about it. However, doing this can be beneficial as you can end up saving as much as $2,500 every year from this deduction. Paying off your student loans can be a long and arduous process as it is, and any deductions can go a long way in saving your money.
Whether you have taken your student loans from a US bank or any other foreign bank, you can still apply for the student loan interest deduction as long as you fulfil the requirements.
Read More: How to Pay off Student Loan Fast?
The deduction can be very valuable, so it is essential to document all your student loans properly, as you will need these papers when you are filing for the deduction. You should get help from a professional if you are unsure how to calculate it yourself, and you can end up saving a ton of your money every year with just this one simple move.
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