CSS Profile + Tax Deductibles from Interest from Loans

Paying for College
1

<p>Some people were saying they are not in a hurry to pay off their undergraduate student loan debt because the interest from the loan is tax deductible.</p>

<p>What do they mean by “tax deductible”? I’ve never filed tax forms before so I don’t know what “tax deductible” means. Does it mean you pay less taxes than you would have? Also is the tax deductible applied towards the income tax, the state tax, or local tax or a different kind of tax? If so, which tax? Also is it tax deductible dollar per dollar? What if you don’t work for 4 years while still paying off the loan with the interest. Do the tax deductibles get “rolled over”?</p>

<p>Also the tax deductibles is only applied to federal loans, right?</p>

<p>Thanks.</p>

<ol>
<li><p>How many fee waivers can a student qualify per year to use for the CSS Profile (this only applies to the first time a student uses it as a senior)? </p></li>
<li><p>How much of a low income student do you have to be?</p></li>
<li><p>With the use of a fee waiver, what is the reduced cost? </p></li>
<li><p>How do you submit proof that you are low income to qualify for the fee waiver?</p></li>
</ol>

<p>Thanks.</p>

<p>I go to a UC but I’m asking this for my friend since he wants to know.</p>

<ol>
<li><p>Some people were saying as long as you receive free or reduce lunch or you qualify for an SAT fee waiver you will qualify for a CSS Profile fee waiver.</p></li>
<li><p>Some people were saying the cost becomes $0.</p></li>
<li><p>Some people are saying they see the information itself on the CSS Profile itself.</p></li>
</ol>

<p>Can someone confirm these answers and answer question #1?</p>

<p>Thanks.</p>

<p>I also found this but I don’t know how to interpret it.</p>

<p><a href=“http://www.irs.gov/taxtopics/tc456.html[/url]”>http://www.irs.gov/taxtopics/tc456.html&lt;/a&gt;&lt;/p&gt;

<p>

</p>

<p>So is the maximum I’m able to deduct is $2,500? And if I deduct more than $600 I have to fill out special forms?</p>

<p>Here is another link I found but it is confusing.</p>

<p><a href=“http://www.irs.gov/publications/p970/ch04.html[/url]”>http://www.irs.gov/publications/p970/ch04.html&lt;/a&gt;&lt;/p&gt;

2

<p>I don’t like double posting but I can’t edit my posts. </p>

<p>Can some do a sample calculation for me? So if my AGI is $40,000. And I pay $1,000 in interest. How much tax deductible do I get?</p>

<p>Is it something like this:</p>

<p>700 x (40,000 - 60,000) // 15,000 = 933</p>

<p>1000-933 = 67.</p>

<p>So I pay $1000 interest but I get back 933 so in the long run, I’m only paying 67 per year in interest? Is this correct?</p>

3

<p>Hi. I’m not a tax expert, and I can’t answer the questions about fee waivers, but I’ve been filing tax returns for more years than you’ve been alive, so I can throw a little general info your way.</p>

<p>A deduction reduces your taxable income, which means you pay less tax, so that’s good! But I must disagree with your friends. It’s always better to pay off debt more quickly. </p>

<p>I want to be sure you understand that it’s not the loan payment that is deductible; it’s the interest on the loan payment that is deductible. </p>

<p>The calculation in your second post is not something you need to worry about. The tax forms and tables do all of that work for you. You just put numbers in boxes as directed and do a bit of simple arithmetic. The form will walk you through it step by step, but here’s the general gist:</p>

<p>Income (wages, etc – from the W2 which your employer sent you in January)
Minus adjustments to income (this is where you put the interest figure, not a calculation, just the total interest paid; it’s line 18 on the 1040A)
Equals your adjusted gross income. Go to Page 2.
Minus the standard deduction
Minus exemptions
Equals taxable income. This figure is lower than it would have been if you hadn’t had adjustments to income. So therefore your tax will be lower. See how it works? :)</p>

<p>Note that if you paid $1000 in interest, that doesn’t reduce your tax by $1000. It basically reduces your tax by the amount of the deduction times your effective tax rate, which is probably in the 20% range. So that $1000 interest paid might reduce your tax bill by around $200. (You might share that information with your friends who want to keep paying their loans as long as possible :wink: )</p>

<p>Yes, the maximum you can deduct is $2500, which would be a huge amount of interest to pay in a year. Again, you can only deduct interest, not the full payment.</p>

<p>You don’t need to fill out a special form if you deduct more than $600. That’s a form you would have received from the entity that you pay the loan to. If you didn’t get the form, that just means you’ll have to figure out how much interest you paid, rather than them doing it for you. You should be able to go back through your loan statements to calculate that if necessary.</p>

<p>I was just looking at the IRS website, and it does not say that the deduction is limited to federal loans. If you took a private loan for the sole purpose of paying for qualified educational expenses (tuition, books, room & board, etc.), then you can deduct the interest on that as well.</p>