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If someone makes larger loan payments, are they forbidden from taking the education credit?

mom2collegekidsmom2collegekids 83917 replies1003 discussionsForum Champion Financial Aid, Forum Champion Alabama Posts: 84,920 Forum Champion
It doesn’t seem like it makes sense. Some folks are thinking that if they make large loans payments while their kids are in college (to pay down loans more quickly) that the IRS is told and they can’t take the tuition tax credit.

That doesn’t sound right at all.

Why would the IRS care if a family/student made large loan payments while student is in college? Why/how could that effect the means-testing or other eligibility for tuition tax credit?
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Replies to: If someone makes larger loan payments, are they forbidden from taking the education credit?

  • kelsmomkelsmom 15411 replies98 discussionsRegistered User Posts: 15,509 Senior Member
    No, this isn't a thing.
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  • cptofthehousecptofthehouse 28056 replies56 discussionsRegistered User Posts: 28,112 Senior Member
    Huh? That makes no sense. Not so
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  • twoinanddonetwoinanddone 21937 replies14 discussionsRegistered User Posts: 21,951 Senior Member
    The tuition tax credits are for paying tuition, not for repaying loans.

    If you pay tuition for that semester with a loan, you can still take a tax credit for that amount. It doesn't matter if you paid the tuition with loan money or with savings or current income, you paid that tuition during that tax year so you get a credit.

    If you paid back a loan during the tax year, you were paying a loan, NOT paying tuition, so no credit.
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  • cshell2cshell2 160 replies3 discussionsRegistered User Posts: 163 Junior Member
    @twoinanddone - Why can't a person be doing both? Paying tuition AND paying down a loan? I don't think they are saying people are trying to get the credit on a loan payment.
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  • mommdcmommdc 11239 replies29 discussionsRegistered User Posts: 11,268 Senior Member
    Well, maybe they mean if the parent pays back the student loan then neither the parent nor the student can claim the student loan interest deduction?
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  • cptofthehousecptofthehouse 28056 replies56 discussionsRegistered User Posts: 28,112 Senior Member
    Students can still take the loan interest deduction if they have enough income to deduct it.

    It’s two separate things: 1) college loan interest deduction 2) Tuition credit

    You can have either one without the other, both or neither.
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  • twoinanddonetwoinanddone 21937 replies14 discussionsRegistered User Posts: 21,951 Senior Member
    I was trying to make sense of the original question. Tuition is a deduction (or can be), loans are not deductible (student or otherwise). Student loan interest might be deductible, but 'making large payments' implies it is principal being repaid, not interest.
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  • mommdcmommdc 11239 replies29 discussionsRegistered User Posts: 11,268 Senior Member
    It is tricky to qualify for loan interest deduction, from the little I read about it.
    The person who is required to pay back the loan has to claim it, so for student loan that is the student. But I think they can't be a dependent of the parent for tax purposes and an income limit applies as well.

    So if the parent pays the loan or the student is dependent of parent for tax purposes then the student can't claim the deduction. The parent can't claim it because it is the child's loan, and by the time the student is independent for taxes, they might be earning too much to qualify.
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  • cshell2cshell2 160 replies3 discussionsRegistered User Posts: 163 Junior Member
    The only credit I know of is the American Opportunity Credit and the Lifetime Learning Credit, neither of which should have anything to do with loan payments. The student loan tax break is a deduction.
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  • mom2collegekidsmom2collegekids 83917 replies1003 discussionsForum Champion Financial Aid, Forum Champion Alabama Posts: 84,920 Forum Champion
    Thank you!!!
    Believe me, the question didn’t make sense. When I learned that some parents thought this I couldn’t make sense of it either. So I put the question to you.

    They really thought that by making larger than scheduled loan payments on student loans would somehow trigger something with the IRS and affect their education tax credit. Made no sense to me and glad to see it makes no sense to any of y’all.
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