For those who have just entered the “real world” or finished their higher education, student loans could create a large financial burden. Fortunately, the IRS has issued a deduction for those who are forced to pay student loans. Up to $2500 can be deducted from a return, however the individual must qualify based on five standards:
1) Paid interest on a qualified student loan in 2011
2) Legally obligated to pay interest on a qualified student loan
3) Filing status is not “married filing separately”
4) Modified adjusted gross income is less than a specified amount (this is set annually)
5) If filing jointly, cannot be claimed as dependents on someone else’s tax returns
If more than $600 was paid in interest towards student loans, then the individual must have received a 1098-E student loan interest statement.