Borrower Tax Incentives

Borrowing federal student loans comes with tax advantages, whether you’re in repayment, still taking classes, or getting help from your employer.

Student Loan Interest Deduction

You may qualify for a tax deduction just by paying your student loans. If you are not being claimed as a dependent on your parents’ tax return, it is possible for you to deduct up to $2,500 of student loan interest paid during a year. This tax benefit is available regardless of whether you itemize deductions or not.

According to a survey done by the U.S. Government Accountability Office dated May 1, 2008, 19% of eligible tax filers do not claim deductions or tax credits for educational purposes. To learn more about tax benefits for education, visit the IRS’s website at http://www.irs.gov/pub/irs-pdf/p970.pdf.

If you have questions regarding deducting student loan interest, call American Student Assistance^® (ASA) at 866.493.5563.

Lifetime Learning Tax Credits

You may claim a federal Lifetime Learning Tax Credit for qualified education expenses each year. Qualified expenses include money you paid for education costs (either directly or from borrowed funds for your own education), your spouse’s education, or the education of a dependent whom you claim as an exemption on your tax return. This tax credit reduces the amount of income tax you may have to pay, and there’s no limit on the number of years you can enjoy this credit.

Chapter 3 of IRS Publication 970 or a qualified tax professional will help you determine your eligibility.

Employer Education Assistance

If your employer gives you money for education assistance, you can deduct up to $5,250 of that money, and in some cases more. Chapter 11 of IRS Publication 970 has the details about eligibility and how it works.