Taxpayers currently paying off a student loan will get Form 1098-E from their lenders. The lenders will report how much interest the taxpayer pays annually. Student loan interest can be deductible on federal tax returns. The student loan lenders are required to send the 1098-E Form only if they have paid $600 as student loan interest during the tax year. For those who have several student loans from the same lender, the financial institution will apply the $600 threshold and will send separate Form 1098-E for each loan.
Who sends Form 1098E?
The tax Form 1098-E is sent by loan service providers that collect loan payments. Lenders can either service their loans or hire an external company to handle them. These service providers will send the 1098-E Form to anyone who pays $600 or more as loan interest and send these Forms to the taxpayers by the end of January.
Those who have paid less than $600 as loan interest might not get a 1098-E form. Still, the taxpayer should contact the loan service provider to learn how much is paid as interest. Those who have an online account with the loan service provider can log in and download the interest statement as well.
Form 1098-E Student Loan Tax Information
Taxpayers can use the 1098-E form to figure out the deduction of their student loan interest. Taxpayers can deduct up to $2500 worth of student loan interest from their taxable income if they meet the following conditions,
- The income limit of the taxpayer is below the annual limit.
- The interest was the legal obligation of the taxpayer to pay.
- Filing status is not ‘married and filing separately’.
- If you are filing a joint return, neither you nor your spouse should be claimed as a dependent on other tax returns.
The eligibility of the student loan interest deduction should be based on the adjusted gross income of the taxpayer. As of the year 2022, for single taxpayers, the deduction is reduced once the taxpayer has reached $70,000 of modified AGI. For taxpayers who are married, the deduction gets reduced to $145,000 of modified adjusted gross income.
Irrespective of how much interest the taxpayer has paid, the maximum deductible tax amount is $2500. If the taxpayers are eligible to deduct their student loan interest, then the deductible amount will be entered at Schedule 1 against income adjustment. Taxpayers should check Box 2 of this tax Form if the amount reported on Box 1 doesn’t include the origination fees of the loan or any capitalized interest.
The IRS offers tax benefits for education, and these benefits can be used on tuition or as loan interest to maximize college savings. If you don’t receive Form 1098-E from your service provider, you can download the Form from the website of the service provider. Those who receive multiple loans from different service providers will receive a separate 1098-E from each service provider. If you are not sure of how best to file Form 1098-E, you can take expert help from tax professionals at Tax2efile.