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What is Form 1098-E and Who Should Receive One?

June 11th, 2013 No comments

Form 1098-E serves as the Student Loan Interest Statement and is used for claiming the  Student Loan Interest Deduction. If you have been repaying student loan debt to institutions such as Sallie Mae or American Education Services, you are entitled to claim the interest paid as a deduction on Form 1040 or 1040A.

You will receive a 1098-E if the interest you paid on a student loan in a given year exceeded $600. Form 1098-E is available directly through the web portal of your loan servicer or you can request a paper copy. If you have been repaying your loans strictly online, then your Form 1098-E will not be mailed to you and instead is available on the loan servicer’s website.

Please note, if the student has been listed as a dependent by another taxpayer the student becomes ineligible for this deduction. Similarly, the taxpayer who claimed the student as a dependent is also unable to claim the Student Loan Interest Deduction.

What information is reported on a 1098-E?

Your loan servicer’s information and federal identification number should be clearly outlined in the Recipient’s/Lender’s box. This information is completed by the issuer of the 1098-E and you can use this as a checklist to confirm that you have received all of your 1098-E forms if you have multiple loan servicers.

Underneath the loan servicer’s information is your personal information including name, address, social security number, and account number used for your student loan. Review this information and If anything is incorrect on your 1098-E, contact your loan servicer directly to settle the discrepancy. The IRS is not able to assist with these matters.

Box 1 of the form reflects the total amount of interest you can claim for the tax period. Sometimes this number may not be the exact amount of interest you paid if the covered period has come to a close, i.e. the first 60 months that your loan is in repayment not including deferment, forbearance and other graces.

In general, Box 2 does not concern most student debtors. Box 2 is checked if there are no interest payments included loan origination fees or capitalized interest before Sept 1, 2004. If the box is checked and you believe you are entitled to a deduction, consult Pub. 970 for more information about deductible loan origination fees or capitalized interest.

How do I claim the Student Loan Interest Deduction?

Reflect the exact amount reported on Form 1098-E in Box 1 to ensure no conflicts between your taxes and what’s been reported to the IRS already. Fill in line 33 of Form 1040 or line 18 of Form 1040A. There is no line on Form 1040-EZ to claim the Student Loan Interest Deduction.

If you believe you have paid more interest than shown in Box 1, contact your loan servicer. Do not put an amount that does not match the reports given to the IRS. Please note the warning that is printed directly on your 1098-E that says overstating your deduction could result in action by the IRS.

Do I submit my 1098-E with my 1040 return?

Financial institutions, government agencies and educational institutions provide you with a 1098-E to keep for your records. The loan servicer sends the IRS the information directly and you must not affix it to your return. Report the exact amount of the summation of all your 1098-E forms on the appropriate lines and hold on to the forms for your records.

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How to complete IRS Form 1098-E

June 4th, 2013 No comments

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.
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About IRS Form 1098-E and Student Loan Interest Deduction

June 28th, 2010 No comments

Form 1098-E is an information return that is used by student loan lenders to report interest paid toward the loan. Any interest paid on a student loan is tax deductible. A copy of Form 1098-E can be requested from a student loan lender for this information to help a person fill out their taxes. For lenders, Form 1098-E must be ordered from the IRS since it can not be downloaded from their website.

Most tax preparation software has a line to enter student loan interest paid to help on calculate their deductions. Student loan interested may be deducted up to $2,500. There are also other requirements for the deduction:

1.) The tax preparer must not have a modified adjusted gross income (MAGI) of over $75,000 if single and $150,000 or more if married.

2.) The tax filer must have any filing status except: married filing separately.

3.) There must have been interested paid on a qualified student loan.

4.) There must be a legal obligation to pay interest on that loan.

Not every loan qualifies. For example, if a student loan was refinanced for more than the amount of the original loan, and the money was used for other purposes besides education purposes, the interest paid on that loan would not qualify for a deduction.

Loan origination fees that are used to pay for services by the lender can not be deducted as interest.

Also, certain student loan repayment programs such as the NHSC Loan Repayment Program may affect how loan interest payments are calculated.

Loan origination fees qualify if the fee is required for the use of the money rather than for services provided by the lender.

Another loan payment that may qualify is credit card debt. Interest on revolving debt that is used to pay for educational expenses can be deducted and is considered student loan interest. However, the credit card must be exclusively used for educational purposes.

Both consolidated and collapsed loans qualify as well. Refinanced student loans qualify as well, again, as long as the money is used for educational purposes.

Voluntary payments also qualify for the deduction. Interest payments can be deducted for the life of the loan.

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