FAQs: Interest-paid Tax Deduction & Lifetime Learning Credit for 2012
As a Direct Loan servicer, Nelnet’s Partner Solutions team receives questions from the school financial aid and borrower communities on a regular basis. In an effort to share the information and educate our school partners, we are posting to our blog some of the more relevant and well-timed questions that we receive.
Q: Can a student or parent take a student loan interest-paid tax deduction if they have not started paying on any loans yet?
A: They may be eligible to claim the student loan interest as a deduction on their federal income taxes if they have made interest payments on student loans, paid origination fees, or capitalized interest. It is encouraged that the borrower contact a tax advisor to determine his or her eligibility regarding these deductions. If they would like additional information concerning the Taxpayer Relief Act, a copy of the IRS Publication 970, Tax Benefits for Higher Education (Cat. No. 25221V) can be obtained by calling 800.TAX.FORM (800.829.3676).
Q: If they have started to pay on their loans, how does the borrower find his or her information?
A: Students are able to log into their account and access the amount of interest they have paid toward their student loan account during 2012. For Nelnet, the borrower can actually click Print My Tax and print the official IRS Form 1098-E. In addition, Nelnet sent borrowers their tax information by the end of January 2013.
Q: Does the Lifetime Learning Credit only apply if the student or parent paid any tuition-related fees out of pocket or any extra supplies/books that they had to purchase related to school?
A: The Lifetime Learning Credit is a nonrefundable tax credit with a dollar limit per family that is available for qualified tuition and related expenses of higher education, whether the student is at the undergraduate or graduate level. The Lifetime Learning Credit is calculated by taking a percentage of the qualified educational expenses paid. Please refer to IRS Publication 970, Tax Benefits for Higher Education (Cat. No. 25221V) for more information.
Do you have any servicing-related questions? Please let us know so we can help you and others in the school community who may be wondering the same thing.