How Student Loans Can Affect Your Taxes

Chicago Consumer Tax Relief AttorneyThere are many factors in your life that affect your tax liability – either favorably or not. Paying a mortgage, being self-employed, having children, and other important circumstances are all vital when it comes to your taxes. One factor that many people may not realize can significantly affect their taxes is student loan debt.

Deducting Interest

As you pay your student loans, you will likely pay a substantial amount of interest in addition to the principal amount of the debt. While this interest may seem detrimental when you pay it, it can provide a benefit when tax time comes around. As the New Year starts, you should be receiving a form in the mail called a 1098-E, which is the statement of the interest you paid in the previous calendar year from your lender. Note that if your interest was less than $600, you will be responsible for calculating this amount on your own. You can then write this amount off of your taxes, which can make a serious difference in some cases.

Taxes on Debt Forgiveness

There are many different circumstances under which part of your student loan balance will be forgiven by your lender. In these situations, the forgiven amount will be considered to be income for that year by the IRS. This means that you will likely see a substantial increase in your tax liability. You can plan ahead for this by discussing student loan forgiveness with your tax attorney.

Contact an Experienced Chicago Consumer Tax Relief Attorney Today

People often do not take full advantage of all the possible tax benefits regarding student loan interest and are also often shocked at the possible implications of student loan forgiveness. If you have student loans, it is important to discuss this fact with an experienced tax attorney, especially if you are behind on your taxes, are being audited, or have been otherwise contacted by the IRS. If you need legal assistance with your taxes in Chicago or across the U.S., please call the legal team at Attorneys Tax Relief at 800-819-6866 for more information today.

1https://www.irs.gov/uac/form-1098-e-student-loan-interest-statement

2https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation

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