Can I claim the 1098-E student loan interest paid for my dependent student?

[CindyKR]

Our dependent child received a 1098-E for the $556.34 paid on a student loan while still a full-time student. They also received the following documents: W-2, 1098-T, 1099-Misc, and 1099-INT.

Because the loan is in our child's name, TurboTax says we cannot use the interest payment as a deduction on our parent tax return. And, TurboTax says our child cannot deduct the payment on their taxes because they are our dependent.

Is there some way for either of us to claim what seems like a valid deduction?
If not, am I supposed to still enter the 1098-E on the tax return somewhere? If so, how?

[Coleen3 · Accepted solution]

Unfortunately, no.

If your name is not on a loan, it means you are not legally obligated to make payments on it and you cannot deduct the interest.

If your name is on the student loan and your parent pays it AND claims you as a dependent, then NEITHER of you can claim the student loan interest deduction.

From Pub 970

Don't Include as Interest

You can't claim a student loan interest deduction for any of the following items.

• Interest you paid on a loan if, under the terms of the loan, you aren't legally obligated to make interest payments.

• Can You Claim the Deduction?

  Generally, you can claim the deduction if all of the following requirements are met.

  • Your filing status is any filing status except married filing separately.

  • No one else is claiming an exemption for you on his or her tax return.

  • You are legally obligated to pay interest on a qualified student loan.

  • You paid interest on a qualified student loan.

  Example 2.

  During 2017, Jo paid $1,100 interest on her qualified student loan. Only she is legally obligated to make the payments. Jo's parents claimed an exemption for her on their 2018 tax return. In this case, neither Jo nor her parents may deduct the student loan interest Jo paid in 2018.

https://www.irs.gov/publications/p970#en_US_2017_publink1000178237

[CindyKR]

Yes, I read that in the publication. I just thought I must be reading it wrong or there was something else that nullified it because it didn't seem fair. Yeah, I know that sentiment is ridiculous. I was hopeful, though. It seems so counter intuitive and counter-productive. Everyone says not to keep debt, so it's like we are being punished for trying to pay off debt early so the interest does not capitalize. But, if we waited, more interest would accrue. Seems like the government wants either interest from students later or taxes now. They can't just encourage kids to get out of debt fast so they can be productive adults and have more choices in life.

Well, thanks for your time anyway. I appreciate the clarity.

[Coleen3]

Mypleasure.