In 2021, my daughter, i.e., a dependent on my wife's and my joint return, took out a student loan from a commercial bank and her grandmother, i.e., my mother, or I was the cosigner.
Earlier this year, my mother paid the principal and interest directly to the lender in full, which I consider to be a gift to my daughter.
In TurboTax 2021, the following instructions were provided:
Student Loan Interest Deduction Worksheet
As long as your filing status is not married filing separately and you are not claimed as a dependent by someone else, you may be able to deduct up to $2,500 of qualified student loan interest you paid during 2021.
Qualified Student Loan
You, or your spouse if filing jointly, must be the person legally obligated to pay the loan, but the loan can be used to pay for your spouse's, your dependent's, or your own qualified education expenses. If you borrowed money from a relative to pay for education costs, or any of the loan was used for other purposes, or the loan was from a qualified employer plan, you cannot deduct any interest you paid on those loans.
In early 2024, my daughter should receive a 1098-E from the bank for the interest on the student loan.
Given the instructions provided by TurboTax 2021, will neither my daughter or I be able to deduct the interest paid?
Thanks!
QRFMTOA
