If you have received a 1098 E Form, you might be wondering what it is and why you received it as part of your taxes. This complete guide has all you need to know regarding the form.
Tax season can be confusing, especially when you receive many different forms in the mail and you aren't sure what they are for. Filing taxes on your own for the first time can be difficult. If you're a student and you received a 1098 E Form, there can be a lot of confusion regarding what to do.
The 1098 E Form is used to report how much interest you paid on student loans. It should be sent to you by your loan service company if you paid $600 or more in student loan interest.
If you have loans from more than one provider, you might also get more than one 1098 E Form since each provider should send a form to you. You will have a copy of the form as well as the IRS. You might still be confused about this form and how to file it. Keep reading to see exactly how to use this form.
Who Sends Form 1098-E?
You will receive the 1098 E form from your loan service providers. If you have more than one provider, you will receive more than one form. You might receive the form from an outside company that services the loans for your provider. If this is the case, it should still say who the form is coming from.
Keep in mind that you will only receive this form if you paid $600 in interest in student loans or more. You should also receive the forms by the end of January in most cases.
What If I Didn't Receive the 1098-E Form?
If you think you should have received the 1098-E form and you didn't, make sure to contact your loan service provider right away. The sooner you do so, the sooner you can start filing your taxes properly.
If you paid less than $600, you would not receive a 1098-E form since the minimum is $600. If you aren't sure how much you paid in interest, your loan service providers should be able to tell you.
Your loan service provider should be giving you statements either in the mail or through your account, where you can see how much interest you are paying. If you see that you paid more than $600 in interest, contact your provider.
What is the 1098-E Form Used For?
The 1098-E form is used to show how much interest you paid for student loans. A 1098-E tax deduction can help you with your taxes since interest paid on student loans is all deductible. You can deduct up to $2,500 from your income.
Keep in mind, though, that you will need to meet a few requirements before being able to deduct the taxes, including:
- The interest was your obligation, and you are not paying it for someone else
- Your filing status is not married; filing separately
- You and your spouse cannot be claimed as dependent on someone else's tax return
- Your income is below the annual limit
- You meet all the income requirements
Knowing whether you have met the income requirements can be confusing, so here are the basic requirements:
- If you're a single taxpayer, the deduction is reduced once you have $70,000 of modified AGI and eliminated at $85,000
- If you're a married taxpayer, the deduction is reduced to $140,000 of modified AGI and eliminated at $170,000
All eligibility for student loan interest loan deduction is based on the MAGI or your modified adjusted gross income. This number should be calculated as you are filing your tax return.
Frequently Asked Questions about Student Loan Deductions
Student loans have always been one of the hardest things to figure out when it comes to higher education. Unfortunately, many loan service providers can be vague, leaving you with many questions about how much you are paying and what your monthly or annual interest is.
1098-E forms can be used for federal and private loans. Some people report that getting information from private loan providers is often more difficult because they might have their own rules and regulations that are different from federal providers.
Most student loan providers, though, have a customer service number or someone that has been assigned to you that you can contact. Make sure you contact them with questions and concerns as soon as they arise so that it doesn't affect your tax filing.
Here are some common questions regarding the interest on loans and how they affect your 1098-E form.
How Do I Read Form 1098-E?
The 1098-E form has two main boxes. Box one shows your student loan interest summary. It will be the total amount you paid in interest during the tax year. This number is only the interest you paid, not the amount you paid for loan repayments.
If you took out your loan on September 1, 2004, or later, Box one would also show capitalized interest and loan origination fees.
If you took out your loans before this date, you might qualify to deduct any capitalized interest or origination fees. They will not be listed in Box one, but if you qualify, you will see a checkmark in box two. Otherwise, box two is blank for most people.
Once you have received the 1098-E form, it's your responsibility to report it on your tax forms.
Do I Need to Itemize to Get Student Loan Interest Deduction?
No, you do not need to itemize at all to qualify for student loan interest deduction. It's only an adjustment of your modified gross income, so you don't need to itemize your taxes.
How Can I Calculate My Student Loan Interest Deduction?
You can deduct up to $2,500 on your student loan deductions. Although, most people find that their actual savings are not this much. This is because your deduction is based on the amount of interest you paid, your tax bracket, and your income.
The maximum it will lower your tax bill is $550 annually. The benefit of being able to deduct it from your taxes starts to go down once you have reached the 22% tax bracket.
There are many calculators online that you can use to see how much you might actually save from the student loan interest deductions. If you are using an accountant or professional service, they might also be able to give you a better idea of how much you will save.
Will I Receive a 1098-E If I Refinanced My Student Loans?
If you refinanced your student loans, your interest is most likely still eligible for tax deductions. If it is, you will receive a 1098-E form. If you aren't sure, you need to contact your loan provider and ask since there are some cases where refinancing your loans means you can no longer deduct the interest.
For example, if you refinance for more than the original value of the loan and use the extra amount to pay for expenses unrelated to education, you cannot deduct the interest you paid on that loan.
Does the 1098-E Form Include Employer Help for Loans?
During the start of the COVID-19 pandemic, the government enacted the CARES act. This allowed certain employers to make tax-free student loan payments for employees. This only applied to the 2020 tax season, so it should not affect your taxes or interest payments going forward.
However, if you received this assistance, it should have been reported on your 2020 taxes. Your 1098-E form will not mention this assistance.
Do I Receive a 1098-E If I Qualified for Student Loan Forgiveness?
Many people who have high monthly payments participate in the income-driven student loan forgiveness program to make their payments more manageable. You still have to pay taxes on a loan that is forgiven though.
Any loan that is forgiven is considered income by the IRS. So, you will need to pay taxes on it. This is not reported on a 1098-E form though. If you have had loans forgiven, you should receive different tax forms from your student loan service provider to help you file the correct information.
The 1098-E form is sent out to you by your student loan service provider to show you the interest you paid on student loans. This interest is tax-deductible from your gross income as long as you meet the requirements discussed previously in this article.
By now, you should have all your most important questions answered when it comes to the 1098 E form and how to use it. Getting a little bit of a tax break by deducting your interest can help you financially. Keep in mind that you need to have paid at least $600 in interest to be able to deduct this from taxes. If you're not sure, contact your loan provider.
Shawn Manaher is a former financial advisor, has founded 5 online businesses, and is a coach, speaker, podcast host, and author. He's been featured on Forbes, The Consults Corner on TAE Radio, The Writing Biz, What's Your Story, and more.