5 things you may not know about your loans and taxes

1. We only report and send you forms for $600.00 or more but you can claim everything

If you paid more than $600.00 in interest or had more than $600.00 in loans forgiven we will report these figures to the IRS and send you a form in the mail.  If it is less than $600.00 you will not receive a form, however this information can still (and should be) reported to the IRS.

2. With many loan forgiveness programs, your forgiveness amount is taxable

If you have your loans forgiven via an Income Driven plan, Death, or Disability, what is cancelled will be reported as taxable income.  If you receive forgiveness through Teacher Loan or Public Service Loan Forgiveness, it will not be taxable.

3. Only the DOE can seize your taxes, not your servicer

Your Servicer cannot garnish tax returns or wages.  What happens is once your loan hits default status it is transferred to another company through the DOE that handles collections.  Once this occurs you are eligible for all the negative repercussions of default such as garnishments.

4. 1098-T comes from your school, where as 1098-E and 1099-C is from your servicer

A 1098-T form is for reporting educational expenses.  This comes from your school.  Your servicer will not be able to get you this form.  The forms that come from your servicer is the 1098-E (eligible interest) and 1099-C (cancelled debt).

5. You can only claim interest paid not interest accrued and it can’t be paid by a third party

If you make no payments during the year, you are unable to claim any interest as only interest PAID is eligible to be deducted.  Also if a third party such as Americorp pays your interest, it is not deductible as only borrower payments are eligible.

 

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