Q. I’m going to do my taxes this year, first time in four years. Over this period I’ve payed off a $10000 student loan. A friend says that the payments aren’t deductable, only the interest is. I thought student loans were tax free, so why did I have to earn 16000 taxed dollars to pay off a $10000 loan? Is this the way it is?
A. -Borrowed money isn’t income.Repaid loans aren’t deductions.The cost of “student loans”, the interest, is an income reduction not to exceed $2,000 in year 2000.There is a phase-out of this deduction based on income.This applies to the first 5 years of the loan repayment period only.No deduction is allowed if you are married and filing separately or if you are claimed on someone else’s tax return.-You may also be able to get some tax credits for the tuition paid (if any) during those years. .
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