Can we help our daughter with paying down student loan balance in a tax-advantaged way?

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)

Using IRA money for paying tuition and other qualified educational  expenses (QEE) only eliminates the early withdrawal penalty, it does not eliminate the tax on the IRA distribution. 

Student loan payments, whether interest or principal, does not count as QEE for either an IRA penalty waiver, tuition credits or 529 plan withdrawals.

So, other than the student loan interest deduction, there is no tax advantaged way to pay down student loans.