Can i deduct student loan interest if i am cosigner?

[lou196320]

My daughter is no longer a student, but has not been working and is still a dependent.  Her name is on the loan, but I am the co-signer and have been making all of the payments

[JaimeG · Accepted solution]

Yes, a parent who cosigned student loans may claim the student loan interest deduction. To claim the student loan interest deduction, the borrower must be legally obligated to make the payments on the student loans and the Student must be a dependent of the Cosigner. Cosigning the loans counts as legally obligated to make the payments.

For more information please visit the FAQ below: 

https://ttlc.intuit.com/replies/3302319

[i0402do]

But if the child is no longer a dependent can the parent still deduct the interest on a student loan they co-signed for? 

[xmasbaby0]

@i0402do 

If you are a co-signer and YOU are making the payments then you can take the deduction.  It has nothing to do with claiming your child as a 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 2018 (Form 1098E)

[i0402do]

thx

[bab2020]

Hi JaimeG et al.,

Your answer is as close as I've been able to get to an answer for this scenario. I even talked to the IRS today and they claimed that the 2019 IRS Pub 970 (pg 34-35) was all that covered it. I mentioned it seems incomplete and we left it at that.

I'd like to add a couple words (bolded below) to clarify further, but I'd appreciate your/others feedback on the accuracy of my additions. Here goes:

"Yes, a parent who cosigned student loans may claim the student loan interest deduction. 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) and 2) the Student must currently be a dependent of the Cosigner, or 3) have been a dependent of the Cosigner at the time that the loan was approved. Again, Cosigning the loans counts as legally obligated to make the payments."

The "...2) have been a dependent of the Cosigner at the time that the loan was approved." is the meat of the part I've added and I'm unsure about. Any comments or corrections are very welcome.

Regards . . .

[jmcintoshcpa]

There's no requirement that the child be a dependent when the interest is paid, only that they were a dependent at the time the debt was incurred.

[bab2020]

Thank you for the helpful feedback : )

[kalpat2544]

My child is in a1st yr collage full time, I am showing my child as my dependent in my return.

However, trbotax shows only parents name and not child's name at student loan interest section. Does this mean child is not eligible, if over 18? We received 1098-E on my child's name (I am a cosigner as a parent) and I am paying the loan? 

Thank you in advance.

[PattiF]

Yes, you can include the student loan interest that you paid for your dependent on a student loan that you cosigned. 

[BossManFan]

What if the 1098-T is my child's name?

To be specific, two Discover Student loans are in question here:

1) Loan 1 was paid off in full by using $10K worth of 529 funds.  The 1098-T showed $2500 or so in interest.

2) Loan 2 is still being paid off by me and I can't recall the exact interest payment but it was over $1000.

[SweetieJean]

@BossManFan  A 1098-T is for Tuition.  Do you mean 1098-E?

[SweetieJean]

Loan 1 was paid off in full by using $10K worth of 529 funds.  

You cannot also deduct anything for this one.

[Hal_Al]

Q. What if the 1098-T is my child's name?

A. It does not matter. It also does not matter if the 1098-E is in the student' name

As long as the student is the beneficiary of the 529 plan, you may use the 529 distribution to pay off the student loan, including interest and principal.  If you paid the interest with 529 money, you may not also claim the student interest deduction. That would be "double dipping" on tax breaks.

As to the 2nd loan,  you may only, claim the interest deduction if you are legally obligated to pay it (as well as you actually paid it).  That is, the loan must be in your name or you co-signed for it. It does not matter that the 1098-E is in the student's name.  One additional requirement: the student must have been your dependent at the time the student loans were used to pay expenses.

[Al in NH]

The problem is that the Instructions in Turbo tax say you can only claim the Deduction on the 1098 -E if its in your name. I think something is screwed up. I am the co signer, I have the money directly coming out of my bank account. I Was text chatting with Turbo Tax last night and they told me to contact the lender.  Navient said they would not change the 1098-E and talk to my accountant. Talk about a run around! 

Do I just click its my name on the 1098-E in your opinion?