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About Form 1098-E

February 1st, 2011 No comments

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.

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