My mom took out a PLUS Loan for my college, but I've been paying on it since I graduated. The IRS and our tax preparers told me I could claim the interest paid as long as I was the one making all the payments, I had proof of it, and my mom wasn't claiming it as well.
However, H&R Block NOW says that's not true. The loan was for me, so it's not like I'm a random paying it for a tax break. Please let me know
2007-11-01 14:05:27 · 6 answers · asked by happee 2 in Business & Finance ➔ Taxes ➔ United States
What if I have a legal contract with her saying I'll make all the payments and am responsible for the loan? Does that make a difference?
2007-11-01 14:54:37 · update #1
Oh, and I'm specifically referring to tax year 2003, since that had the most interest.
2007-11-01 16:38:03 · update #2
Quote from IRS Tax Topic on Student Loan Interest Deduction:
"You cannot claim the deduction if:
1. Another taxpayer claims an exemption for you as a dependent,
2. Your filing status is married filing separately, or
3. You are not legally obligated to make payments on the loan. "
Since you paid the loan, your mother cannot take the deduction either.
The borrower receives a 1098E from the lender showing the student loan interest paid, and sends a copy to the IRS.
Even though you are not now your mother's dependent, she can take the student loan interest deduction in the future, if she makes the payments. You could give her the money and have her send the payments in, and that would allow her to take the deduction.
Your mother is the borrower and cannot assign responsibility for repayment, and the deduction, to you. If you sign an agreement to pay your mother an amount equal to the loan, that may be legally binding, but it is not a student loan. The interest you would pay is not deductible to you, but it is income to your mother.
2007-11-02 00:29:43 · answer #1 · answered by ninasgramma 7 · 0⤊ 0⤋
If you aren't legally required by the loan terms to pay the loan, and it's in your mom's name only, then no you can't claim the interest even if you are the one actually making the payments.
2007-11-01 18:40:14 · answer #2 · answered by Judy 7 · 0⤊ 0⤋
You should read page 33 of Form 1040 instructions for the requirements.
Also if you file 2003 return or amended return, you won't get any refund of tax. For 2004, you must file before April 15, 2008. Also student loan interest deduction is on line 33 of Form 1040 that is it is taken even if you don't itemize your deductions.
2007-11-01 19:05:45 · answer #3 · answered by MukatA 6 · 0⤊ 0⤋
H&R Block is correct. You cannot claim interest paid on a loan unless you pay it AND are legally responsible to pay the interest. You've only met one of the two necessary criteria. Your mother is the person legally bound to pay the loan, since it is in her name.
2007-11-01 14:31:00 · answer #4 · answered by acermill 7 · 1⤊ 0⤋
If your name is not on the loan, which it sounds like it's not, you cannot claim the interest paid.
2007-11-01 14:13:24 · answer #5 · answered by smartsassysabrina 6 · 1⤊ 0⤋
Once upon a time you could take interest, but the rules were changed to limit interest deductions to mortgage loans or home equity loans on primary residences.
2007-11-01 16:24:05 · answer #6 · answered by cattbarf 7 · 0⤊ 2⤋