Can I deduct a non-dependent's student loan interest if I cosigned when student was a dependent?

[bab2020]

Hi,

Does anyone know if the following in bold is correct?

"... To claim the student loan interest deduction, the borrower must be 1) legally obligated to make the payments on the student loans (this includes co-signers who are legally obligated) and 2) the Student must currently be a dependent of the Cosigner, or 3) the student must have been a dependent of the Cosigner at the time that the loan was approved."

Bolded "3)" is the item of concern. It's not unusual for parents to continue to assist graduate students with interest-only payments, even though the graduate student has passed the age limit for dependent status (ie. 24 or older).

IRS Publication 970 "Tax Benefits for Education" makes no mention of this technicality. I appreciate any advice.

Thanks . . .

[xmasbaby0]

If you co-signed for the student loan and are the one making the payments, you can deduct the interest.  The student does not have to still be your dependent.

STUDENT LOAN INTEREST

Only the person whose name is on the student loan and who is legally obligated to pay the loan can deduct the student loan interest.  If you did not sign or co-sign for the loan you cannot deduct the interest.

You cannot deduct student loan interest if you are being claimed as someone else’s dependent, or if you are filing as married filing separately.

The student loan interest deduction can reduce your taxable income by up to $2500

There is a phaseout for the Student loan interest deduction, which means the amount you can deduct gets reduced when your modified adjusted gross income hits certain income levels and is even eliminated at certain income levels -  

• If your filing status is single, head of household, or qualifying widow(er), then the phaseout begins at $65,000 until $80,000, after which the deduction is eliminated entirely.

• If your filing status is married filing joint, then the phaseout beings at  $130,000 until $160,000, after which the deduction is eliminated entirely.

Enter the interest you paid for your student loan by going to Federal>Deductions and Credits>Education>Student Loan Interest Paid in 2019 (Form 1098E)

Look on your 2019 Schedule 1 line 20 to see your student loan interest deduction

[NCperson]

what is the source of your bullets?  

here is what publication 970 states from the IRS: (page 34)

Can You Claim the Deduction?
Generally, you can claim the deduction if all of the follow-ing requirements are met.
•Your filing status is any filing status except married fil-ing separately.
• No one else is claiming you as a dependent 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.

[Carl]

In a nutshell, if all three criteria below are true, you can claim the interest.

1) The student must have been your dependent in the tax year the loan was originated.

2) You must be legally obligated to make the payments

3) You must have actually made the payments.

[NCperson]

sorry @Carl - #1 is not required - see my post above, taken from the IRS publication 

if my rich elderly aunt co-signed for my loan and she is now making the payments (and not me), she can take the loan interest deduction even though i was never her dependent. 

[Carl]

Which IRS pub? You forgot to mention it, and I can't find it since I don't recall the pub number. I do know there's three requirements. I suspect that 1st requirement is that the student have been enrolled as such, in the year the loan was originated. Besides, if it wasn't originated in the same tax year the student enrolled, then the money would not have been designated as a "qualified" student loan by the lender anyway. :}

It does make sense that if my grandmother co-signed the loan, yet I was never in my life her dependent, then she should be able to deduct the interest if she actually paid it.

[NCperson]

here is what publication 970 states from the IRS: (page 34)

Can You Claim the Deduction?
Generally, you can claim the deduction if all of the follow-ing requirements are met.
•Your filing status is any filing status except married fil-ing separately.
• No one else is claiming you as a dependent 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.

[bab2020]

If it helps our discussion, I just opened another (well-known) Turbo Tax competitor's 2018 software, and they say (I'm claiming Fair Use here): "The student must be you, your spouse, or your dependent at the time you took out the loan."

Based on the replies in this thread, and the "...or your dependent at the time you took out the loan" from above, I'm going with: Student loan interest is deductible to the person paying the interest if 1) the interest payer was legally responsible for the loan, and 2) "legally responsible" is effective the day the loan was actually approved, and not the day the loan was originated.

Btw, as far as I know, originated and approved are two different things, that may or may not occur in the same year (e.g loan originated on 12/15/xx, but not approved until 1/5/xx). Additionally, the co-signer is not legally responsible for a loan application (ie.  loan origination) that was never approved.

As far as the "grandmother" scenario, that seems like another circumstance that IRS Pub 970 does not seem to accurately address. Maybe the Intuit tax accountant mavens can take this up with the IRS for final clarification.

My thanks to everyone for their contributions and help. This is an interesting thread and I'll stay subscribed for updates : )

Regards . . .