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Wife co signed for eduacation loan,for grandaughter. Grandaughter quit school and wife is paying loan. Who claims the interest on taxes?

 
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3 Replies

Wife co signed for eduacation loan,for grandaughter. Grandaughter quit school and wife is paying loan. Who claims the interest on taxes?

If the student was not your dependent you can’t deduct the interest. If the student is not a dependent of someone she can deduct the interest. If she is a dependent no one can deduct the interest unless the one claiming the dependency is also a co-signer. 

MaryK4
Expert Alumni

Wife co signed for eduacation loan,for grandaughter. Grandaughter quit school and wife is paying loan. Who claims the interest on taxes?

To be able to claim the student loan interest you must have actually made the payment so the granddaughter would not qualify.  Your wife would be able to claim IF she claimed the granddaughter at the time the loan was taken out.  See Topic No. 456 Student Loan Interest Deduction.  

 Your granddaughter  may be able to claim the interest- If you are the person legally obligated to make interest payments and someone else makes a payment of interest on your behalf, you are treated as receiving the payments from the other person and, in turn, paying the interest.

 

@Bsch4477

[ Edited 1/30/2021 | 12:53pm PST ] 

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Wife co signed for eduacation loan,for grandaughter. Grandaughter quit school and wife is paying loan. Who claims the interest on taxes?


@Bsch4477 wrote:

If the student was not your dependent you can’t deduct the interest. If the student is not a dependent of someone she can deduct the interest. If she is a dependent no one can deduct the interest unless the one claiming the dependency is also a co-signer. 


This is the better answer here.  To deduct student loan interest, you must be the person who made the payments, and the student must be yourself, or your dependent at the time the loan was made, and you must be the borrower or a co-signer.  If the child was your dependent when the loan was made, then you can deduct the interest, if you pay it, even if the child is no longer your dependent.  But if the child was not your dependent when you co-signed the loan, you can't deduct the interest.  Sorry. 

 

However, your granddaughter can deduct the interest as if she had paid it herself, as long as she meets the other qualifications to deduct student loan interest.  See page 34 of publication 970. https://www.irs.gov/pub/irs-pdf/p970.pdf

 

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