Factoring in student loan debt can be especially confusing.
Here are three ways student loan debt affects your taxes, from deductions to tax bills you might owe in the future.
1. You can deduct student loan interest from your income.
If you paid interest on student loans last year, you can lower your taxable income by up to $2,500.
2. Filing jointly with a spouse could increase your student loan payment.
More and more grads are opting for income-driven repayment plans to pay off their federal student loans. These plans limit your monthly payment to a percentage of your discretionary income. Plus, they forgive your loan balance after you’ve made payments for 20 or 25 years.
3. You could be in for a big tax bill if your loans are forgiven later on.
You’ll get your federal student loans forgiven after a certain number of years if you take advantage of the government’s Public Service Loan Forgiveness program, or if you choose an income-driven repayment plan. But these two options affect your taxes very differently.
Courtesy of USAToday
For more information contact Neikirk, Mahoney and Smith at 502-896-2999
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