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Do Student Loans Count As Income On Your Taxes? Here Is What You Need To Know

Student loans are a common source of debt for students. While student loans are usually considered to be income, they do not always count as income on your taxes. Here are the things you need to know about student loans when it’s time to file your taxes.

What is considered taxable income?

The IRS considers all income to be taxable. This includes money you earn from your job and any money you earn from investments or other sources.

However, there are deductions that reduce your overall tax burden. When you file your taxes every year, you’ll receive a number that’s known as your Adjusted Gross Income or “AGI.” Your AGI is the total of all your taxable income, minus any deductions you qualify for.

Do student loans count as income on your taxes?

The answer is: it depends.

Generally, student loans are NOT considered taxable income as long as they meet certain standards. Student loans that were taken out to pay for tuition and other school-related costs are generally regarded as educational expenses and not taxable income. Additionally, student loan payments made while you’re still in school are not subject to federal or state taxes until you’ve earned over $60,000 per year.

If you’ve taken out student loans to cover other costs, like living expenses or a car payment, those debts may be taxable as income. The amount of income that your student loans count as will depend on the terms of your loan and your individual tax situation.

What types of financial aid are considered income?

There are a few different types of financial aid that can be considered income.

  • Employer-provided tuition assistance. If you’re working for a company that offers tuition assistance or reimbursement, that money is considered taxable income.
  • Tuition assistance from a government or educational institution. This type of aid is usually given in the form of a grant rather than a loan and is not considered taxable income.
  • Most scholarships or grants are not considered part of your taxable income, but any leftover money is considered income and will affect your AGI. Example: If you receive a $25,000 scholarship and only use $20,000 to pay for tuition, books, etc. but use $5,000 for room and board, then you’ll be taxed for the remaining $5,000.
  • Remaining portions of student-athlete stipends. Stipends that don’t directly go toward education-related expenses are considered income.
  • Work-Study programs. Work-study programs are a great way to earn money while you’re in school. However, they are considered taxable income since you’re considered a university employee.

How can I reduce my taxable income from student loans?

If you’ve used your student loans for things that aren’t considered education-related expenses by the IRS, there are a few things you can do to reduce your tax burden:

  1. Try to pay off your loans as quickly as possible. This will reduce the amount of interest that you’re paying and could result in a smaller tax bill. Many online tools can help you create a plan for getting your loans paid, like this debt repayment calculator.
  2. Claim any student loan forgiveness programs that you qualify for. These programs can reduce your taxable income by up to $2,500 per year.
  3. Use tax breaks available to you, such as the tuition and fees deduction or the American Opportunity Tax Credit.

The bottom line

Student loans can be a great way to get the money you need for college and don’t typically affect your AGI unless they’re in a category of financial aid that the IRS deems as taxable. Remember, it’s essential to consult with a tax professional to get an accurate understanding of your specific situation.

See Campaign: https://www.credello.com

Contact Information:

Name: Carolina Darbelles Email: press@credello.com Job Title: Senior PR Specialist

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Google News, Financial Content, ReleaseLive, PR-Wirein, CE, Reportedtimes, IPS, Menafn, iCN Internal Distribution, Extended Distribution, English

Contact Information:

Name: Carolina Darbelles
Email: press@credello.com
Job Title: Senior PR Specialist

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