Those who owe money on federal student loans are going through a strange moment, so it stands to reason that this year's tax season will also be strange for them.
Until the Supreme Court rules on the legality of the relief strategy, the Biden administration's plan to forgive up to $20,000 in student debt for tens of millions of Americans is on hold.
The majority of student loan debtors' bills are also still on hold as a result of a pandemic-era policy. What all of this entails for your Uncle Sam tax bill is as follows. Most likely, you cannot deduct the interest on student loans.
The student loan interest deduction, which enables borrowers to deduct up to $2,500 a year in interest payments, was utilized by approximately 13 million taxpayers prior to the Covid epidemic.
According to higher education analyst Mark Kantrowitz, most borrowers haven't made a payment on their debt and are therefore ineligible for the deduction because the U.S. Department of Education has enabled them to halt their monthly payments without interest collecting since March 2020.
According to Kantrowitz, "You can claim the student loan interest deduction based only on amounts actually paid."
Even if you've continued to pay over the break, you probably won't be able to deduct the full amount because your money has been going straight to the main of your debt. According to Kantrowitz, the suspension only applies to interest payments, which have been stopped for years.
Until the Supreme Court rules on the legality of the relief strategy, the Biden administration's plan to forgive up to $20,000 in student debt for tens of millions of Americans is on hold.
The majority of student loan debtors' bills are also still on hold as a result of a pandemic-era policy. What all of this entails for your Uncle Sam tax bill is as follows. Most likely, you cannot deduct the interest on student loans.
The student loan interest deduction, which enables borrowers to deduct up to $2,500 a year in interest payments, was utilized by approximately 13 million taxpayers prior to the Covid epidemic.
According to higher education analyst Mark Kantrowitz, most borrowers haven't made a payment on their debt and are therefore ineligible for the deduction because the U.S. Department of Education has enabled them to halt their monthly payments without interest collecting since March 2020.
According to Kantrowitz, "You can claim the student loan interest deduction based only on amounts actually paid."
Even if you've continued to pay over the break, you probably won't be able to deduct the full amount because your money has been going straight to the main of your debt. According to Kantrowitz, the suspension only applies to interest payments, which have been stopped for years.
Tags
student loans