Today TaxMama hears from Heidi in California, with a common misunderstanding. “I know I can report student loan interest paid, but I’m wondering if I qualify for the tuition and fees deduction if I officially ended school in 2008, graduated in Jan. of 2009, and made payments for all of 2009.”
Good, you understand the part about the interest deduction. But sorry. And I think you already know.
Payments on a student loan are loan payments. They are not education expenses.
Over the years, I have found that this is one of the hardest concepts to convey to someone. When you buy something in one year, and pay for it for many years afterwards, it’s hard to remember that you used the deductions in the year of the purchase.
The education expenses took place in the year you borrowed the money to pay the college.
Most likely your tuition in that year, or those years, was much, much higher than you were able to deduct as credits, or expenses. So you really didn’t get the full tax benefit for the money you spent.
When will the Legislature face the reality that college does not cost $4,000 per year? Even in state colleges, tuition and fees tends to be closer to $10,000. And trade schools are much higher – to say nothing of the top colleges, which might cost $50,000 – $100,000 or more! Let’s face it, an investment in our youth’s education is an investment in America’s future.
Unfortunately, even though it may feel like you’re making payments for the rest of your life, no more education expenses. Just loan payments.
Now, put that very expensive education to good use – and make enough money to pay those loans off quickly.
Or at least do something you passionately love to do, with that education, and it will make the loan payments less painful.
And remember, you can find answers to all kinds of questions about education tax benefits and other tax issues, free.
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