For a graduated student who is now independent and paying bills on a Parent Plus Loan in their parent's name, can the ex-student claim the tax deductible interest?

[Loans4Days]

For the following situation

* Parent Plus Loan - in parents name; married filed jointly with a household income less than $100k

* Person making the payments on said Parent Plus Loan - independent single student making $60-$80k; child of the parents; not listed as an exemption on parents tax return

In what situation is it possible for the now independent student to claim the tax deductible interest on their personal taxes? For reference the amount of interest paid on the Parent Plus Loan is around ~$10k. I am aware that the most you can deduct is either $2,500 or the total amount of student loan interest you paid, whichever is less.

[Phillip1 · Accepted solution]

Unfortunately, no. The graduated student could not deduct the interest if they are not legally liable for the loan.

You can claim student loan interest as a deduction if all of the following apply:

• You paid interest on a qualified student loan in tax year 2017;
• You're legally obligated to pay interest on a qualified student loan;
• Your filing status isn't married filing separately;
• Your MAGI is less than a specified amount which is set annually; and
• You or your spouse, if filing jointly, can't be claimed as dependents on someone else's return.

The other option is to give the payments to your parents and have them make the payments. It still won't help you on your taxes, but they would be able to use the deduction because they would meet all of the requirements above. If the total amount of payments for 2018 are under 30,000 dollars (assuming both of your parents are on the loan - 15k if only one is one parent is on the loan) you would not have to worry about gift tax returns.

[Loans4Days]

So for an ex-student who now has a single salary larger than his parent's household, what are the best options to gain the most tax benefits? Only one parent is on the loan, so as you mentioned a maximum of $14,999 could be provided to the parents and not worry about gift tax returns.

Additionally, any general financial advice (not necessarily tax advice) on how to handle a loan this large? Death and Disability Discharge are two perks of the Parent Plus Loan that I am really holding onto; as I would hate to pass this large loan onto someone in my family who is not able to afford it.

Total balance on all five Parent Plus Loans exceeds $100k. Interest rates are fixed non-subsidized between 6.16% - 7.65%. Currently on an Extended Fixed Repayment plan where monthly payments are $820 (over 12 months is then roughly $10k; essentially all in interest).

[Phillip1]

Unfortunately, there aren't really any tax benefits for you in this situation and giving advice on managing student loans is outside the scope of advice that I am qualified to provide. However, keep checking back on this question as there may be general TurboTax users who may offer advice as the tax season progresses.

[gabs1028]

So If i were to give the form to my parents.. and they got the tax break. How can i calculate the portion of their tax return that is actually from the interest I paid on the loan?