When looking at your clients tax situation, you see they have paid a sizable amo

Question

When looking at your clients tax situation, you see they have paid a sizable amount of student loan interest for the year. Which of the following is not a good piece of advice to give them?

1.)The tax law allows taxpayers to deduct up to $2,500 of student loan interest expenses

2.)This falls under itemized deductions and so you only receive the credit if you don’t take the standard deduction for the year

3.)To qualify for student loan interest deductions, the loan proceeds must have been used to pay for qualified education expenses

4.)In addition to student loan interest expense, loan origination fees, credit card interest expenses, and any capitalized interest expenses are also deductible

Explanation / Answer

2) is the answer as education loan is not fall in itemized tax deduction. Only few of the items are under this deduction they are expense for medical care, home loan, donations, business expenses those are not reimbursable and theft casualties. So this is not advisable.

In income tax act student loan can claim their interest expenses up to $2,500. Loan amount can be cost college tution fees, books, equipment, supplies.Tax deduction for the interest payment is not only for the education loan but also include all federal loans and credit interest expenses.

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