You may be able to deduct up to $2,500 on your 2006 return of interest paid on any qualified education loan. You can get this tax benefit even if you don't itemize deductions.
The deduction for interest on education loans is for taxpayers whose modified adjusted gross income is less than $65,000 ($135,000 for joint filers). The maximum possible deduction starts being phased out for taxpayers with modified adjusted gross incomes greater than $50,000 ($105,000 for joint filers).
You may deduct interest paid in 2006 on loans taken out in or before 2006.
Congress has abolished the restriction that allowed the deduction only for interest paid during the first 60 months (5 years) of repayment. You can now deduct qualifying interest no matter how long it takes you to repay the debt.
You cannot claim the deduction for any year that another taxpayer claims you as a dependent.
Interest is deductible only if paid by the person responsible for the debt. If a parent repays loans for which a child is responsible, then, no one gets the deduction. In that situation, it would be better for the parent to give funds to the child to repay the loan; that way, the child could deduct the interest.
You cannot claim the deduction if your filing status is married filing separately.
You do not need to itemize your deductions on Schedule A to qualify for this deduction. You get the tax benefit even if you claim the standard deduction.
You cannot deduct interest on a loan from a related person or from a retirement plan, such as a 401(k).
Interest that you can deduct for other reasons (such as home mortgage interest) cannot be deducted as education loan interest.
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