Student Loan Interest deduction

To claim a deduction for interest paid on student loans, a taxpayer must meet all of the following criteria:

-Interest was paid in 2012 on a qualified student loan
-Filing under any status other than married filing separately
-Modified Adjusted Gross Income1 (MAGI) is less than $75,000 if single, head of household, or qualifying widow(er); $155,000 if married filing jointly
-Taxpayer or taxpayer’s spouse are not claimed as a dependent on someone else’s 2012 tax return

Additionally, the student using the loan proceeds must be one of the following individuals:

-Taxpayer or taxpayer’s spouse
-Taxpayer’s dependent at time loan was acquired
-Any other person the taxpayer could have claimed as a dependent for the loan’s origination year had (1) that person not (a) filed a joint return, or (b) had gross income equal to or greater than the exemption amount for that year ($3,800 for 2012), or (2) the taxpayer or spouse not been claimable as a dependent on someone else’s return.

A final requirement mandates that the student loan proceeds must have been be spent (1) at an eligible educational institute (most colleges, universities, and certain vocational schools) and (2) only on qualified expenses (tuition, fees, room and board, and related expenses such as books and supplies).

1Form 1040 calculation: Line 22 reduced by the sum of Lines 23-32

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