Tax Savvy People - Student Loan Interest Deduction

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2014
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Tax Savvy People - Student Loan Interest Deduction

Postby 2014 » Wed Dec 24, 2014 10:41 pm

A couple of questions for any of you who might know the answer to this.

1. Assuming one has $2500 to dump into student loan interest does it make sense to do this your 3L year even if your loans aren't in repayment yet?

2. Is there an income threshold for the year where it no longer makes sense (obviously short of the full phase out at 75k)?

3. Logistically, does the loan entity need to receive (and cash?) the check by Dec 31? Or can it just be dated/post marked by then?

I intended to think about this far sooner but shit happens, don't want to miss out if it is an unequivocal good idea. TYIA for the help.

anonnymouse
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Joined: Tue Mar 08, 2011 3:52 pm

Re: Tax Savvy People - Student Loan Interest Deduction

Postby anonnymouse » Thu Dec 25, 2014 1:11 am

2014 wrote:A couple of questions for any of you who might know the answer to this.

1. Assuming one has $2500 to dump into student loan interest does it make sense to do this your 3L year even if your loans aren't in repayment yet?

2. Is there an income threshold for the year where it no longer makes sense (obviously short of the full phase out at 75k)?

3. Logistically, does the loan entity need to receive (and cash?) the check by Dec 31? Or can it just be dated/post marked by then?

I intended to think about this far sooner but shit happens, don't want to miss out if it is an unequivocal good idea. TYIA for the help.

1. Origination fees can count as interest so you may not have to pay the full $2500 for calendar year 2014 -- read the IRS publication on what origination fees count and which don't (hint: if you only took federal loans, I think you can deduct the full amount). It makes sense to do it if you can float the cash. In investing terms, it's like getting a 401k match from your employer. You're getting the gov't to pay some of your loans for you. In this case, 15% (if you only had income from 2L SA) or 25% (if you made more, up to the beginning of the phaseout limit).

2. Not really. Free money is free money.

3. Not sure but if you log in to your servicer's website and schedule an immediate payment, it will probably process before Dec 31.

This is not tax or legal advice, btw.

GOATlawman
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Re: Tax Savvy People - Student Loan Interest Deduction

Postby GOATlawman » Thu Dec 25, 2014 7:55 am

above is true but....

only if you have so much income during your 2L spring+2L summer+3L fall that you wouldn't be getting a full or nearly full refund. Hard to imagine a circumstance this is true unless you've been working at a firm part-time or somethin

anonnymouse
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Re: Tax Savvy People - Student Loan Interest Deduction

Postby anonnymouse » Thu Dec 25, 2014 3:21 pm

GOATlawman wrote:above is true but....

only if you have so much income during your 2L spring+2L summer+3L fall that you wouldn't be getting a full or nearly full refund. Hard to imagine a circumstance this is true unless you've been working at a firm part-time or somethin

Standard summer is 10 weeks at $3100/week = $31,000. Subtract standard deduction of $6200 and you're still well into the 15% bracket -- no one should be getting a full refund of their Fed tax withholding. Fed tax liability should be $3266.25 on $31k gross assuming only the standard deduction.

Edit: forgot the personal exemption but you'd still be well into the 15% bracket after that -- 31000 - 6200 - 3950 = 20850. Fed tax liability should be $2673.75.

GOATlawman
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Re: Tax Savvy People - Student Loan Interest Deduction

Postby GOATlawman » Thu Dec 25, 2014 3:51 pm

anonnymouse wrote:
GOATlawman wrote:above is true but....

only if you have so much income during your 2L spring+2L summer+3L fall that you wouldn't be getting a full or nearly full refund. Hard to imagine a circumstance this is true unless you've been working at a firm part-time or somethin

Standard summer is 10 weeks at $3100/week = $31,000. Subtract standard deduction of $6200 and you're still well into the 15% bracket -- no one should be getting a full refund of their Fed tax withholding. Fed tax liability should be $3266.25 on $31k gross assuming only the standard deduction.

Edit: forgot the personal exemption but you'd still be well into the 15% bracket after that -- 31000 - 6200 - 3950 = 20850. Fed tax liability should be $2673.75.


I got a full refund from 10 week SA. As long as you're claiming yourself you can take the education credits. American Opportunity credit is a $2500 credit (which will even pay you 40% if you go over full refund), which I think you can use 4x in life, and I didn't use it in undergrad. Otherwise, there is also Lifetime learning credit (which is $2000). Also, tuition and fees deduction reduce AGI up to $4000

plus all the other credits and deductions you may be to claim based on your own personal life

calculus obv changes if you're dependent on your parents

Anonymous User
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Re: Tax Savvy People - Student Loan Interest Deduction

Postby Anonymous User » Thu Dec 25, 2014 4:41 pm

Can't take the American Opportunity Credit for grad school, it has to be for one of the first four years of post-secondary education. If you didn't use it for UG you can amend but not take it for later years.

That's what I gathered from reading the publication on education shit just now at least.

anonnymouse
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Re: Tax Savvy People - Student Loan Interest Deduction

Postby anonnymouse » Thu Dec 25, 2014 7:26 pm

GOATlawman wrote:Otherwise, there is also Lifetime learning credit (which is $2000). Also, tuition and fees deduction reduce AGI up to $4000

plus all the other credits and deductions you may be to claim based on your own personal life

calculus obv changes if you're dependent on your parents


Apart from what the anon said above, you can't take the credit AND deduct tuition and fees.

IRS Publication on Deducting Tuition & Fees wrote:No Double Benefit Allowed

You cannot do any of the following.
Deduct qualified education expenses you deduct under any other provision of the law, for example, as a business expense.

Deduct qualified education expenses for a student on your income tax return if you or anyone else claims an American opportunity or lifetime learning credit for that same student in the same year.

GOATlawman
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Re: Tax Savvy People - Student Loan Interest Deduction

Postby GOATlawman » Thu Dec 25, 2014 8:32 pm

That's right was just going from memory sry. Not a big diff though and should be plenty for a $31k salary

Anonymous User
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Re: Tax Savvy People - Student Loan Interest Deduction

Postby Anonymous User » Thu Dec 25, 2014 10:52 pm

anonnymouse wrote:
GOATlawman wrote:Otherwise, there is also Lifetime learning credit (which is $2000). Also, tuition and fees deduction reduce AGI up to $4000

plus all the other credits and deductions you may be to claim based on your own personal life

calculus obv changes if you're dependent on your parents


Apart from what the anon said above, you can't take the credit AND deduct tuition and fees.

IRS Publication on Deducting Tuition & Fees wrote:No Double Benefit Allowed

You cannot do any of the following.
Deduct qualified education expenses you deduct under any other provision of the law, for example, as a business expense.

Deduct qualified education expenses for a student on your income tax return if you or anyone else claims an American opportunity or lifetime learning credit for that same student in the same year.

I think you still can if you have sufficient expenses to cover both (i.e. almost everyone in law school). You just can't double count the same expense. I'll ultimately defer to whatever Turbotax says though, I remember it being programmed in there.




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