If she was a dependent when you took out the loan, and you are also legally liable for repayment (i.e. co-signor), and you actually paid the interest (not her), then you are allowed to take the deduction for the interest paid provided you also meet the overall rules below.
There are also a few other overall rules that must be satisfied. You can claim the deduction if all of the following apply:
- You paid interest on a qualified student loan in tax year 2016;
- 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.
If you meet the above criteria, when you go to enter this information, make sure you select "You" when it asks you about the loan. The question in the 1098E section is not asking whose name is on the form, it is asking whose name is on the loan (which as a co-signor would also be you). Don't select "someone else" or it will disallow the deduction.
