Educational Tax Benefits

The deduction for student loan interest will continue to be available to every person who is legally obligated to repay a student loan through the year 2012. Taxpayers who have student loans are allowed to deduct up to $2,500 in annual interest payments on the loan directly from their gross income, subject to phase-out rules. Your lender will send you a Form 1098-E. The amount of interest you paid on your student loans for the year will be reported on Form 1098-E, box 1. The $2,500 maximum deduction for interest paid on student loans begins to phase out for a married taxpayers filing a joint returns at $125,000 and phases out completely at $155,000, an increase of $5,000 from the phase out limits for tax year 2011. For single taxpayers, the phase out ranges remain at the 2011 levels.($60,000-75,000). Qualifying loans include any debt incurred to pay for higher education expenses for yourself, spouse or a dependent at the time the debt was incurred. The student must have been enrolled on at least a half-time basis when the loan was made in order for the interest to be deductible. The student will receive a form verifying his or her half-time basis eligibility.