Attorney Jay Fleischman wrote a great piece that needs more exposure. Jay talked about how the scant proposed tax reform would impact anyone claiming an interest rate deduction for student loan interest paid. And when I say impact, I mean eliminate the tax deduction.
As it stands now, the IRS allows student loan debtors to deduct student loan interest paid on qualified student loans.
According to the IRS, the current deduction is “You may deduct the lesser of $2,500 or the amount of interest you actually paid during the year. The deduction is gradually reduced and eventually eliminated by phaseout when your modified adjusted gross income (MAGI) amount reaches the annual limit for your filing status.”
“You can claim the deduction if all of the following apply:
- You paid interest on a qualified student loan in tax year 2016;
- You’re legally obligated to pay interest on a qualified student loan;
- Your filing status isn’t married filing separately;
- Your MAGI is less than a specified amount which is set annually; and
- You or your spouse, if filing jointly, can’t be claimed as dependents on someone else’s return.
A qualified student loan is a loan you took out solely to pay qualified higher education expenses that were:
- For you, your spouse, or a person who was your dependent when you took out the loan;
- For education provided during an academic period for an eligible student; and
- Paid or incurred within a reasonable period of time before or after you took out the loan.”
For more information see IRS Form 970.
What You Can Do
As Jay suggested in his article, “If you think this sounds like a raw deal, now’s the time to contact your Congressional representatives and let them know. Tell them you want them to vote against the 2017 Tax Reform for Economic Growth and American Jobs. Let them know the tax reform proposal will hurt you financially, and that you oppose it.”