Q. Why would no one be able to deduct the student loan interest if the loan is only in my daughter's name? That doesn't seem right.
A. It's the usual reason: Congress said so.
- "Neither you nor your spouse, if filing jointly, were claimed as dependents on someone else's return. Another taxpayer is claiming you as a dependent if they list your name and other required information on page 1 of their Form 1040"
Reference: https://www.irs.gov/taxtopics/tc456
You can deduct the interest on the Sally Mae loan, since your spouse is the co-signer (assuming you're filing Married Filing Jointly).
You have the option of foregoing claiming her as a dependent on your return. Then she could claim the interest deduction. But then, you would lose the $500 Other dependent credit and possibly a tuition credit. Your student could not claim the refundable portion of the tuition credit, on her return, since she CAN be claimed as a dependent (and other reasons).
