Understanding tax credits and student loans
When it comes to tax season, finding all available tax credits is important as it can either save you money on what you owe, or increase the amount of money on your refund. If you have filed for bankruptcy, you’ll need to include this information on your tax return, regardless of whether it is Chapter 7 or Chapter 13. While your bankruptcy attorney in Arizona can assist with bankruptcy filings, we recommend that you consult with an accountant or professional tax filer for assistance in identifying all tax credits. If you have paid for college using student loans, chances are you still have loans out, even after bankruptcy (these loans you generally can’t dissolve in such a filing). Thankfully, you can still take advantage of this tax credit.
The Tax Credit is Essentially Interest Reimbursement
The tax credit you receive from student loans is just reimbursement for interest you paid over the year. Depending on the degree you have and where you went to school, you may have only paid a few hundred dollars in interest over the year. However, if you had to take out a considerable amount to pay for your education, you can max out the interest reimbursement at $2,500. This is the “tax credit” cap placed on student loans.
How Much Interest Did I Pay?
If you have extremely high student loans, you probably already know you paid over $2,500 in student loan interest over the course of the year. However, how do you know exactly what you paid in interest so you can claim it on your federal tax return? Your lender likely sent you Form 1098-E. This details your payments, including your tax return. If you didn’t, you need to contact them. Chances are, if you didn’t receive the document from your lender (check your email as many now are sent electronically), there is a good chance you paid less than $600 in interest.
There is a catch though to receiving this tax credit. If you are a single filer, you need to of made less than $80,000 over the year. If you made more than this, you do not qualify for the tax credit. If you are filing jointly, this is kicked up to $160,000 annually as the cut off point.
Even if you used bankruptcy attorneys in AZ previously, you can claim the student loan tax credit on your taxes.