1099 Tax Software Blog

IRS Form 1098-E is used by financial, government or educational institutions to report receipt of student loan interest of $600 or more during the year or one or more qualified student loans.

Qualified student loan.

A student loan must be either:

• Subsidized, guaranteed, financed, or otherwise treated as a student loan under a program of the Federal, state, or local government, or of a postsecondary educational institution, or

• Certified by the borrower as a student loan incurred solely to pay qualified higher education expenses.

Form 1098-E.

The top part of the form shows lender name, address and TIN followed by the borrower name, address and social security number.

Account number.  This is just a unique number that the lender uses to identify or distinquish this borrower.

Box 1. Shows the interest received by the lender during the year on one more more student loans made to this student.

If the loan is made on or after September 1, 2004, Box 1 must incldue loan origination fees and capitalized interest received.

If the loan is made before September 1, 2004, you may be able to deduct loan origination fees and capitalized interest not reported in Box 1.

Box 2. If checked, indicates that the loan was made after September 1, 2004 and that loan origination fees and/or capitalized interest are not included in Box 1.

Copy B of IRS Form 1098-E is sent to the borrower or student by the end of January.  You can print and mail Copy B, e-mail, fax or just print and hand Copy B to the student.  Copy A must be paper filed along with Form 1096 to the IRS by the end of February.  Or the lender can electronically file Copy A  by the end of March.

Why didn’t I receive a Form 1098-E?

The most common reasons as to why a student would not receive Form 1098-E are:

• Your interest payments for the tax year did not total $600 or more. Your loan servicer is required to issue a 1098-E only if the interest payments on your loan met or exceeded this threshold.
• Your 1098-E was mailed to the wrong address. If you did not have a current address on file with your loan servicer, then your form may have gone astray.
• You did not have a valid Social Security Number on file with your loan servicer.Without a valid SSN, Form 1098-E could not be generated for you.
• Your payments were not received within the “covered period” for your loan. Payees are required to report only those interest payments received within the first 60 months that your loan is in repayment, excluding periods of grace, deferment, and forbearance.

Form 1098-E

Form 1098-E must be filed by any financial or government institution, individual, or other entity who receives over $600 in student loan interest from one person during a year. If one entity is receiving interest payments on behalf of another, as in the case of a collection agency, it is the first entity to handle the payment that must report it on form 1098-E.

To qualify as a student loan for tax purposes, a loan must be financed or regulated under Federal, State or local government programs dealing with higher education. The student must officially certify that the loan is used only to pay postsecondary school expenses at an accredited college, university, vocational school or vocational school. The student cannot have used loan money to pay for medical or insurance expenses, room and board, or sports or other hobbies. Mixed-use loans are not reported on form 1098-E.

A copy of form 1098-E is sent to the borrower, who can then use it to claim a Student Loan Interest Deduction. This reduces the amount of income subject to tax by up to $2,500 Per Return, as long as the borrowers are not claimed as dependents on anyone else’s tax return and have a modified adjusted gross income (MAGI) not more than $50,000 for single taxpayers, or $100,000 for married taxpayers.

Box 1 of Form 1098-E lists the total student interest received by the lender, while Box 2 is checked if loan origination fees or capitalized interest are part of the figure listed in part one. (Origination fees or capitalized interest do not have to be included as part of the Box 1 total if the loan was taken out before 2005.)  Other information on the form includes the account numbers, mailing addresses and telephone numbers of the recipients and lenders.