Qualified education expenses don't include amounts paid for:. An eligible institution is within the system of public institutions of higher education section 5 of Chapter 15A of the General Laws. If your American opportunity credit was denied or reduced for any reason other than a math or clerical error for any tax year beginning afteryou must attach a completed FormInformation To Claim Certain Refundable Credits After Disallowance, to your tax return to claim the credit in Student loans Disabled no longer face big tax hit when student loans are forgiven March 1, - Matt Carter. This allows schools to limit the borrowing of students in specific majors or years in school. You can't deduct interest on a loan you get from a related person. So the next time, Carrcian, you feel like your opinion matters on such topics…think real hard…and remember you have not done shit!
You may qualify for discharge of a federal student loan and/or TEACH Grant service obligation if you have a total and permanent disability. We’ve got your back! Student Loan Hero is a completely free website % focused on helping student loan borrowers get the answers they need. The Trump administration announced a new initiative to streamline the student loan forgiveness process for disabled veterans. Find out how to apply.
Why not just automatically discharge the student loan debt obligations for borrowers who qualify? Plans to launch the computer matching program date to , but the first letters to disabled veterans with student loan debt are just going out this this month. Notifications mailed to those borrowers also warned of the potential tax consequences. The campaign generated about 19, new approvals for loan forgiveness. Student loan forgiveness can be granted immediately to veterans classified as percent disabled by the VA.
Government workers and employees of qualified nonprofits can also qualify for tax-free Public Service Loan Forgiveness after making 10 years of payments. It takes 20 or 25 years for other borrowers to qualify for loan forgiveness in an income-driven repayment program , and the IRS still classifies that type of forgiveness as taxable income.
The December 31, sunset on the favorable tax status of section college savings plans and other improvements from the Economic Growth and Tax Relief Reconciliation Act of has been eliminated. These improvements were made permanent as part of the Pension Protection Act of P.
The repeal is effective June 15, All borrowers may now consolidate their loans with any lender. Previously, borrowers who had all their loans with a single lender were required to consolidate their loans with that lender. This increases competition for student loans, and may lead to improved benefits and lower costs for borrowers. This change is effective for tax years beginning after December 31, Previously only private student loans made by a nonprofit institution as well as federal education loans were excepted from discharge.
Student loan interest rates reach historical low, allowing borrowers who consolidate during the in-school period to lock in a rate of 2. Early repayment status loophole allows continuing students to consolidate. Sallie Mae completes privatization. US Supreme Court rulings on affirmative action cases Grutter v. Bollinger and Gratz v. Public Law February 8, changed education loan interest rates from variable rates to fixed rates for new loans issued after July 1, The interest rate on Stafford Loans will be 6.
The lenders also questioned whether the discounts are cost neutral, as required by the Higher Education Act. The Department believes that these reductions will save the government money by preventing defaults, save students money by reducing costs, and are necessary to level the playing field. Many lenders already offer similar discounts. A steady decline in national student loan default rates began in with several changes introduced by the Higher Education Amendments of Cut Stafford loan interest rates by 0.
Cost of attendance may now include the cost of a personal computer. Excludes parents from number in college, switching it to professional judgment PJ. Adds examples of other common special circumstances that merit PJ: Allows financial aid administrators the authority to refuse to certify a student's loan application on a case by case basis, so long as the school is not discriminating based on race, national origin, religion, sex, marital status, age, or disability status.
This allows schools to limit the borrowing of students in specific majors or years in school. It also allows them to refuse to certify a loan if they feel that the student has no intention of repaying the loan. Authorizes the establishment a loan cancellation program for teachers.
When an eligible educational institution provides a reduction in tuition to an employee of the institution or spouse or dependent child of an employee , the amount of the reduction may or may not be taxable. If it is taxable, the employee is treated as receiving a payment of that amount and, in turn, paying it to the educational institution on behalf of the student. For more information on tuition reductions, see Qualified Tuition Reduction in chapter 1. However, the credit may be reduced based on your MAGI.
Jack and Kay Ford are married and file a joint tax return. For , they claim an exemption for their dependent daughter on their tax return. Their daughter is in her junior third year of studies at the local university. Jack and Kay, their daughter, and the local university meet all of the requirements for the American opportunity credit. To help you figure your American opportunity credit, the student may receive Form T, Tuition Statement.
Generally, an eligible educational institution such as a college or university must send Form T or acceptable substitute to each enrolled student by January 31, An institution may choose to report either payments received box 1 , or amounts billed box 2 , for qualified education expenses.
However, the amounts on Form T, boxes 1 and 2, might be different from what you paid. When figuring the credit, use only the amounts you paid or are deemed to have paid in for qualified education expenses. In addition, Form T should give other information for that institution, such as adjustments made for prior years, the amount of scholarships or grants, reimbursements or refunds, and whether the student was enrolled at least half-time or was a graduate student.
If your MAGI is within the range of incomes where the credit must be reduced, you will figure your reduced credit using lines 2—7 of Form , Part I. The same method is shown in the following example. Forty percent of the American opportunity credit is refundable for most taxpayers. However, if you were under age 24 at the end of and the conditions listed below apply to you, you can't claim any part of the American opportunity credit as a refundable credit on your tax return.
Instead, your allowed credit figured on Form , Part II will be used to reduce your tax as a nonrefundable credit only. You don't qualify for a refund if items 1 a, b, or c , 2, and 3 below apply to you. Age 18 at the end of and your earned income defined below was less than one-half of your support defined below , or.
Over age 18 and under age 24 at the end of and a full-time student defined below and your earned income defined below was less than one-half of your support defined below.
You are filing a return as single, head of household, qualifying widow er , or married filing separately for Earned income includes wages, salaries, professional fees, and other payments received for personal services actually performed. Earned income includes the part of any scholarship or fellowship grant that represents payment for teaching, research, or other services performed by the student that are required as a condition for receiving the scholarship or fellowship grant.
Earned income doesn't include that part of the compensation for personal services rendered to a corporation which represents a distribution of earnings or profits rather than a reasonable allowance as compensation for the personal services actually rendered. Your support includes food, shelter, clothing, medical and dental care, education, and the like. Generally, the amount of the item of support will be the amount of expenses incurred by the one furnishing such item.
If the item of support is in the form of property or lodging, measure the amount of such item of support by its fair market value. However, a scholarship received by you isn't considered support if you are a full-time student.
You are a full-time student for if during any part of any 5 calendar months during the year you were enrolled as a full-time student at an eligible educational institution defined earlier , or took a full-time, on-farm training course given by such an institution or by a state, county, or local government agency. You claim the American opportunity credit by completing Form and submitting it with your Form or A. Enter the nonrefundable part of the credit on Form , line 50, or on Form A, line Enter the refundable part of the credit on Form , line 68, or on Form A, line A filled-in Form is shown at the end of this publication.
In Appendix A at the end of this publication, there is an example illustrating the use of Form when both the American opportunity credit and the lifetime learning credit are claimed on the same tax return. For more information, see Figuring the Credit. To be eligible to claim the lifetime learning credit, the law requires a taxpayer or a dependent to have received Form T, Tuition Statement, from an eligible educational institution. They are the American opportunity credit and the lifetime learning credit.
This chapter discusses the lifetime learning credit. The American opportunity credit is discussed in chapter 2. There is no limit on the number of years the lifetime learning credit can be claimed for each student. The lifetime learning credit is a nonrefundable credit. This means that it can reduce your tax to zero, but if the credit is more than your tax the excess won't be refunded to you.
Your allowable lifetime learning credit may be limited by the amount of your income and the amount of your tax. For example, if you elect to claim the lifetime learning credit for a child on your tax return, you can't, for that same child, also claim the American opportunity credit for If you are eligible to claim the lifetime learning credit and you are also eligible to claim the American opportunity credit for the same student in the same year, you can choose to claim either credit, but not both.
If you pay qualified education expenses for more than one student in the same year, you can choose to claim certain credits on a per-student, per-year basis. For example, you can claim the American opportunity credit for the same student for no more than 4 tax years, but any year in which the Hope scholarship credit was claimed counts toward the 4 years.
See Table for the basics of the credit. The following rules will help you determine if you are eligible to claim the lifetime learning credit on your tax return. Generally, you can claim the lifetime learning credit if all three of the following requirements are met. You may find Figure helpful in determining if you can claim a lifetime learning credit on your tax return. You are listed as a dependent on another person's tax return such as your parents'.
You claim the American Opportunity Credit see chapter 2 or a Tuition and Fees Deduction see chapter 6 for the same student in The lifetime learning credit is based on qualified education expenses you pay for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return.
Generally, the credit is allowed for qualified education expenses paid in for an academic period beginning in or in the first 3 months of You can claim a lifetime learning credit for qualified education expenses paid with the proceeds of a loan. You use the expenses to figure the lifetime learning credit for the year in which the expenses are paid, not the year in which the loan is repaid.
Treat loan disbursements sent directly to the educational institution as paid on the date the institution credits the student's account. You can claim a lifetime learning credit for qualified education expenses not refunded when a student withdraws. For purposes of the lifetime learning credit, qualified education expenses are tuition and certain related expenses required for enrollment in a course at an eligible educational institution.
The course must be either part of a postsecondary degree program or taken by the student to acquire or improve job skills. An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U.
It includes virtually all accredited public, nonprofit, and proprietary privately owned profit-making postsecondary institutions. Certain educational institutions located outside the United States also participate in the U. Student activity fees and expenses for course-related books, supplies, and equipment are included in qualified education expenses only if the fees and expenses must be paid to the institution for enrollment or attendance.
Jackson is a sophomore in University V's degree program in dentistry. Because the equipment rental fee must be paid to University V for enrollment and attendance, Jackson's equipment rental fee is a qualified expense.
Donna and Charles, both first-year students at College W, are required to have certain books and other reading materials to use in their mandatory first-year classes. Charles bought his books from a friend, so what he paid for them isn't a qualified education expense. Donna bought hers at College W's bookstore. Although Donna paid College W directly for her first-year books and materials, her payment isn't a qualified expense because the books and materials aren't required to be purchased from College W for enrollment or attendance at the institution.
When Marci enrolled at College X for her freshman year, she had to pay a separate student activity fee in addition to her tuition. This activity fee is required of all students, and is used solely to fund on-campus organizations and activities run by students, such as the student newspaper and student government. Although labeled as a student activity fee, the fee is required for Marci's enrollment and attendance at College X. Therefore, it is a qualified expense.
Deduct higher education expenses on your income tax return as, for example, a business expense and also claim a lifetime learning credit based on those same expenses.
Claim a lifetime learning credit in the same year that you are claiming a tuition and fees deduction see chapter 6 for the same student. Claim a lifetime learning credit for any student and use any of that student's expenses in figuring your American opportunity credit. Claim a lifetime learning credit based on the same expenses used to figure the tax-free portion of a distribution from a Coverdell education savings account ESA or qualified tuition program QTP.
This flowchart is used to determine if you qualify to claim the lifetime learning credit for For any part of were you or your spouse a nonresident alien who didn't elect to be treated as a resident alien for tax purposes? Do you have a tax liability Form , line 47 minus lines 48, 49, and the amount from Schedule R entered on line 22 Form A, line 30 minus lines 31 and 32?
Did you use the same expenses to claim a deduction or credit, or to figure the tax-free portion of a Coverdell ESA or QTP distribution? Did you, or someone else who paid these expenses on behalf of a student , receive a refund of all the expenses? Qualified education expenses paid by your dependent or by a third party for your dependent are considered paid by you.
Your education credits may be limited to your tax liability minus certain credits. See Form for more details. If this tax-free educational assistance is received after and after you file your income tax return, see Refunds received after and after your income tax return is filed , later. The tax-free part of scholarships and fellowship grants see Tax-Free Scholarships and Fellowship Grants in chapter 1 ;.
If any tax-free educational assistance for the qualified education expenses paid in or any refund of your qualified education expenses paid in is received after you file your income tax return, you must recapture repay any excess credit.
You then refigure your education credit s for and figure the amount by which your tax liability would have increased if you had claimed the refigured credit s. You claimed no other tax credits. The use of the money is restricted, by the terms of the scholarship or fellowship grant, to costs of attendance such as room and board other than qualified education expenses, as defined in Qualified education expenses in chapter 1. For examples, see Adjustments to Qualified Education Expenses in chapter 2.
Scholarships and fellowship grants that the student includes in income don't reduce the student's qualified education expenses available to figure your lifetime learning credit.
However, the increase in tax liability as well as the loss of other tax credits may be greater than the additional lifetime learning credit and may cause your tax refund to decrease or the amount of tax you owe to increase. Your specific circumstances will determine what amount, if any, of the scholarship or fellowship grant to include in income to maximize your tax refund or minimize the amount of tax you owe.
The fact that the educational institution applies the scholarship or fellowship grant to qualified education expenses, such as tuition and related fees, doesn't prevent the student from choosing to apply certain scholarships or fellowship grants to the student's actual nonqualified expenses.
By making this choice that is, by including the part of the scholarship or fellowship grant applied to the student's nonqualified expenses in income , the student may increase taxable income and may be required to file a tax return. But this allows payments made in cash, by check, by credit or debit card, or with borrowed funds such as a student loan to be applied to qualified education expenses.
Judy Green, who is unmarried, is taking courses at a public community college to be recertified to teach in public schools. Judy claims no credits other than the lifetime learning credit. Judy and the college meet all requirements for the lifetime learning credit. Under the terms of her scholarship, it may be used to pay any educational expenses, including room and board. If Judy excludes the scholarship from income, she will be deemed for purposes of figuring her education credit to have applied the scholarship to pay for tuition, required fees, and course materials.
Example 3—Scholarship included in income. As in Example 3 , by doing so, she will be deemed to have applied the entire scholarship to pay for room and board. Any benefit will also depend on the student's federal and state marginal tax rates as well as any federal and state tax credits the student claims.
Before deciding, look at the total amount of your federal and state tax refunds or taxes owed and, if the student is your dependent, the student's tax refunds or taxes owed. For example, if you are the student and you also claim the earned income credit, choosing to apply a scholarship or fellowship grant to nonqualified expenses by including the amount in your income may not benefit you if the decrease to your earned income credit as a result of including the scholarship or fellowship grant in income is more than the increase to your lifetime learning credit as a result of including this amount in income.
However, if the course of instruction or other education is part of the student's degree program or is taken by the student to acquire or improve job skills, these expenses can qualify. If you don't receive or don't have access to an allocation showing how much you paid for qualified education expenses and how much you paid for personal expenses, such as those listed above, contact the institution. The institution is generally required to make this allocation and provide you with the amount you paid or were billed for qualified education expenses on Form T.
For purposes of the lifetime learning credit, an eligible student is a student who is enrolled in one or more courses at an eligible educational institution as defined under Qualified Education Expenses , earlier. If there are qualified education expenses for your dependent during a tax year, either you or your dependent, but not both of you, can claim a lifetime learning credit for your dependent's expenses for that year.
For you to claim a lifetime learning credit for your dependent's expenses, you must also claim an exemption for your dependent. Include these expenses when figuring the amount of your lifetime learning credit. If you claim an exemption for a dependent who is an eligible student, only you can include any expenses you paid when figuring the amount of the lifetime learning credit. If neither you nor anyone else claims an exemption for the dependent, only the dependent can include any expenses you paid when figuring the lifetime learning credit.
For purposes of claiming a lifetime learning credit, Todd is treated as receiving the money from his grandmother and, in turn, paying his qualified education expenses himself. Unless an exemption for Todd is claimed on someone else's tax return, only Todd can use the payment to claim a lifetime learning credit. If anyone, such as Todd's parents, claims an exemption for Todd on his or her tax return, whoever claims the exemption may be able to use the expenses to claim a lifetime learning credit.
If anyone else claims an exemption for Todd, Todd can't claim a lifetime learning credit. However, that amount may be reduced based on your MAGI.
Bruce and Toni Harper are married and file a joint tax return. Toni is attending a local college an eligible educational institution to earn credits toward a degree in nursing. She already has a bachelor's degree in history and wants to become a nurse. To help you figure your lifetime learning credit, the student may receive Form T. The eligible educational institution may ask for a completed Form W-9S or similar statement to obtain the student's name, address, and taxpayer identification number.
If your MAGI is within the range of incomes where the credit must be reduced, you will figure your reduced credit using lines 10—18 of Form You claim the lifetime learning credit by completing Form and submitting it with your Form or A.
Enter the credit on Form , line 50, or Form A, line For more information, see Figuring the Deduction. Generally, personal interest you pay, other than certain mortgage interest, isn't deductible on your tax return. For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return before subtracting any deduction for student loan interest.
The student loan interest deduction is claimed as an adjustment to income. This means you can claim this deduction even if you don't itemize deductions on Schedule A Form Student loan interest is interest you paid during the year on a qualified student loan. It includes both required and voluntary interest payments. This is a loan you took out solely to pay qualified education expenses defined later that were:. For you, your spouse, or a person who was your dependent as defined later for this purpose when you took out the loan;.
For this purpose, the term "dependent" also includes any person you could have claimed as a dependent on your return except that:. Qualified education expenses are treated as paid or incurred within a reasonable period of time before or after you take out the loan if they are paid with the proceeds of student loans that are part of a federal postsecondary education loan program.
Even if not paid with the proceeds of that type of loan, the expenses are treated as paid or incurred within a reasonable period of time if both of the following requirements are met. The loan proceeds are disbursed within a period that begins 90 days before the start of that academic period and ends 90 days after the end of that academic period. If neither of the above situations applies, the reasonable period of time usually is determined based on all the relevant facts and circumstances.
An eligible student is a student who was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential. You can't deduct interest on a loan you get from a related person. Certain corporations, partnerships, trusts, and exempt organizations. You can't deduct interest on a loan made under a qualified employer plan or under a contract purchased under such a plan.
For purposes of the student loan interest deduction, these expenses are the total costs of attending an eligible educational institution. They include amounts paid for the following items. The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance for federal financial aid purposes for a particular academic period and living arrangement of the student; or.
If greater, the actual amount charged if the student is residing in housing owned or operated by the eligible educational institution.
An eligible educational institution also includes certain educational institutions located outside the United States that are eligible to participate in the U. For purposes of the student loan interest deduction, an eligible educational institution also includes an institution conducting an internship or residency program leading to a degree or certificate from an institution of higher education, a hospital, or a health care facility that offers postgraduate training.
An educational institution must meet the above criteria only during the academic period s for which the student loan was incurred. The deductibility of interest on the loan isn't affected by the institution's subsequent loss of eligibility. You must reduce your qualified education expenses by the total amount paid for them with the following tax-free items. Tax-free distribution of earnings from a Coverdell education savings account ESA.
See Tax-Free Distributions in chapter 7. Tax-free distribution of earnings from a qualified tuition program QTP. See Figuring the Taxable Portion of a Distribution in chapter 8. The tax-free part of scholarships and fellowship grants. See Veterans' Benefits in chapter 1. In addition to simple interest on the loan, if all other requirements are met, the items discussed below can be student loan interest. In general, this is a one-time fee charged by the lender when a loan is made.
To be deductible as interest, a loan origination fee must be for the use of money rather than for property or services such as commitment fees or processing costs provided by the lender. A loan origination fee treated as interest accrues over the life of the loan. Loan origination fees weren't required to be reported on Form E, Student Loan Interest Statement, for loans made before September 1, If loan origination fees aren't included in the amount reported on your Form E, you can use any reasonable method to allocate the loan origination fees over the term of the loan.
This is unpaid interest on a student loan that is added by the lender to the outstanding principal balance of the loan. Capitalized interest is treated as interest for tax purposes and is deductible as payments of principal are made on the loan. No deduction for capitalized interest is allowed in a year in which no loan payments were made. This interest, which includes interest on credit card debt, is student loan interest if the borrower uses the line of credit credit card only to pay qualified education expenses.
See Qualified Education Expenses , earlier. This includes interest on a loan used solely to refinance a qualified student loan of the same borrower. It also includes a single consolidation loan used solely to refinance two or more qualified student loans of the same borrower.
If you refinance a qualified student loan for more than your original loan and you use the additional amount for any purpose other than qualified education expenses, you can't deduct any interest paid on the refinanced loan. The allocation of payments between interest and principal for tax purposes might not be the same as the allocation shown on the Form E or other statement you receive from the lender or loan servicer. To make the allocation for tax purposes, a payment generally applies first to stated interest that remains unpaid as of the date the payment is due, second to any loan origination fees allocable to the payment, third to any capitalized interest that remains unpaid as of the date the payment is due, and fourth to the outstanding principal.
Peg didn't receive a Form E for from her lender because the amount of interest she paid didn't require the lender to issue an information return. Interest you paid on a loan if, under the terms of the loan, you aren't legally obligated to make interest payments. Loan origination fees that are payments for property or services provided by the lender, such as commitment fees or processing costs.
For more information, see Student Loan Repayment Assistance in chapter 5. You can deduct all interest you paid during the year on your student loan, including voluntary payments, until the loan is paid off. Another taxpayer is claiming an exemption for you if he or she lists your name and other required information on his or her Form or Form A , line 6c, or Form NR, line 7c. Only he is legally obligated to make the payments. No one claimed an exemption for Josh for Only she is legally obligated to make the payments.
Jo's parents claimed an exemption for her on their tax return. In this case, neither Jo nor her parents may deduct the student loan interest Jo paid in If you are the person legally obligated to make interest payments and someone else makes a payment of interest on your behalf, you are treated as receiving the payments from the other person and, in turn, paying the interest.
Darla obtained a qualified student loan to attend college. After Darla's graduation from college, she worked as an intern for a nonprofit organization. As part of the internship program, the nonprofit organization made an interest payment on behalf of Darla.
This payment was treated as additional compensation and reported on her Form W-2, box 1. Assuming all other qualifications are met, Darla can deduct this payment of interest on her tax return. Ethan obtained a qualified student loan to attend college.
After graduating from college, the first monthly payment on his loan was due in December. As a gift, Ethan's mother made this payment for him. No one is claiming a dependency exemption for Ethan on his or her tax return. Assuming all other qualifications are met, Ethan can deduct this payment of interest on his tax return.
You can't deduct as interest on a student loan any amount that is an allowable deduction under any other provision of the tax law for example, home mortgage interest. Your student loan interest deduction is generally the smaller of:. However, the amount determined above may be phased out gradually reduced or eliminated based on your filing status and MAGI as explained below. To help you figure your student loan interest deduction, you should receive Form E, Student Loan Interest Statement.
For qualified student loans taken out before September 1, , the institution is required to include on Form E only payments of stated interest. Other interest payments, such as certain loan origination fees and capitalized interest, may not appear on the form you receive.
However, if you pay qualifying interest that isn't included on Form E, you can also deduct those amounts. The lender may ask for a completed Form W-9S or similar statement to obtain the borrower's name, address, and taxpayer identification number.
The form may also be used by the borrower to certify that the student loan was incurred solely to pay for qualified education expenses. For most taxpayers, MAGI is adjusted gross income AGI as figured on their federal income tax return before subtracting any deduction for student loan interest.
However, as discussed below, there may be other modifications. If you file Form A, your MAGI is the AGI on line 22 of that form figured without taking into account any amount on line 18 student loan interest deduction and line 19 tuition and fees deduction - see chapter 6. If you file Form , your MAGI is the AGI on line 38 of that form figured without taking into account any amount on line 33 student loan interest deduction , line 34 tuition and fees deduction - see chapter 6 , or line 35 domestic production activities deduction , and modified by adding back any: If you file Form NR, your MAGI is the AGI on line 36 of that form figured without taking into account any amount on line 33 student loan interest deduction and line 34 domestic production activities deduction.
If your MAGI is within the range of incomes where the credit must be reduced, you must figure your reduced deduction. Subtract the result from your deduction before the phaseout to give you the amount you can deduct. The student loan interest deduction is an adjustment to income.
Generally, if you are responsible for making loan payments, and the loan is canceled forgiven , you must include the amount that was forgiven in your gross income for tax purposes. However, if you fulfill certain requirements, two types of student loan assistance may be tax free. The types of assistance discussed in this chapter are:. If your student loan is canceled or discharged, you may not have to include any amount in income. This section describes the requirements for tax-free treatment of canceled or discharged student loans.
To qualify for tax-free treatment, for the cancellation of your loan, your loan must have been made by a qualified lender to assist you in attending an eligible educational institution and contain a provision that all or part of the debt will be canceled if you work:. To qualify for tax-free treatment, for the discharge of a loan, the loan must have been made by a qualified lender to assist a student in attending an eligible educational institution and have been discharged in whole or in part after December 31, , on account of the student's death or total and permanent disability.
The cancellation of your loan won't qualify for tax-free treatment if it is canceled because of services you performed for the educational institution that made the loan or other organization that provided the funds. See Exception , later. This is an educational institution that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities.
A state, territory, or possession of the United States; or the District of Columbia; or any political subdivision thereof. A public benefit corporation that is tax exempt under section c 3 ; and that has assumed control of a state, county, or municipal hospital; and whose employees are considered public employees under state law.
As part of an agreement with an entity described in 1 , 2 , or 3 under which the funds to make the loan were provided to the educational institution; or. Under a program of the educational institution that is designed to encourage its students to serve in occupations with unmet needs or in areas with unmet needs where the services provided by the students or former students are for or under the direction of a governmental unit or a tax-exempt section c 3 organization.
Occupations with unmet needs include medicine, nursing, teaching, and law. For loans discharged after December 31, , on account of the death or total and permanent disability of the student, the lender of a private education loan as defined in section 7 of the Consumer Credit Protection Act.
This is any corporation, community chest, fund, or foundation organized and operated exclusively for one or more of the following purposes. Fostering national or international amateur sports competition but only if none of its activities involve providing athletic facilities or equipment.
The cancellation of your loan doesn't qualify as tax-free student loan cancellation if your student loan was made by an educational institution and is canceled because of services you performed for the educational institution or other organization that provided the funds. If you refinanced a student loan with another loan from an eligible educational institution or a tax-exempt organization, that loan may also be considered as made by a qualified lender.
The refinanced loan is considered made by a qualified lender if it is made under a program of the refinancing organization that is designed to encourage students to serve in occupations with unmet needs or in areas with unmet needs where the services required of the students are for or under the direction of a governmental unit or a tax-exempt section c 3 organization.
Any other state loan repayment or loan forgiveness program that is intended to provide for the increased availability of health services in under served or health professional shortage areas as determined by such state. You can't deduct the interest you paid on a student loan to the extent payments were made through your participation in the above programs.
At the time this publication went to print, the tuition and fees deduction formerly discussed in this chapter had expired. For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return. See Contributions , later.
This benefit applies not only to higher education expenses, but also to elementary and secondary education expenses. Contributions to a Coverdell ESA aren't deductible, but amounts deposited in the account grow tax free until distributed. If, for a year, distributions from an account aren't more than a designated beneficiary's qualified education expenses at an eligible educational institution, the beneficiary won't owe tax on the distributions.
See Tax-Free Distributions , later. A Coverdell ESA is a trust or custodial account created or organized in the United States only for the purpose of paying the qualified education expenses of the Designated beneficiary defined later of the account.
When the account is established, the designated beneficiary must be under age 18 or a special needs beneficiary. The document creating and governing the account must be in writing and must satisfy the following requirements.
The document must provide that the trustee or custodian can only accept a contribution that meets all of the following conditions. The contribution is made before the beneficiary reaches age 18, unless the beneficiary is a special needs beneficiary. Money in the account can't be combined with other property except in a common trust fund or common investment fund. The balance in the account generally must be distributed within 30 days after the earlier of the following events.
Generally, these are expenses required for the enrollment or attendance of the designated beneficiary at an eligible educational institution. For purposes of Coverdell ESAs, the expenses can be either qualified higher education expenses or qualified elementary and secondary education expenses.