 Who
gets the PLUS-loan interest deduction?
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 Dear
Tax Talk,
My daughter took out a Parent Plus loan for college. The loan is
in my name. She has since graduated and has started to repay the
loan. The interest is deductible, but since the loan is in my name,
she cannot deduct the interest on her tax return. The institution
said the name on the loan is mine and cannot be changed. Any comments?
-- Joe
 Dear
Joe,
This appears to be the downside of a Parent Loan for Undergraduate
Students, or PLUS. A PLUS loan is not a need-based loan but rather
a credit-based loan.
Since the parent will usually have the good credit,
he or she is the borrower and obligor -- that is, the person on
the hook for the payments. Only the person legally obligated to
repay the PLUS loan can claim the interest deduction. If your daughter
makes the loan payments, you are treated as receiving the amount
she paid and you can claim the deduction on your tax return if you
are otherwise eligible.
In your situation, the impediment to eligibility would
be if your adjusted gross income exceeds the threshold for deducting
student loan interest. The amount of your student-loan-interest
deduction is phased out (gradually reduced) if your modified adjusted
gross income, or MAGI, is between $50,000 and $65,000 ($105,000
and $135,000 if you file a joint return).
You cannot take a student-loan-interest deduction
if your MAGI is $65,000 or more ($135,000 or more if you file a
joint return). For most taxpayers, MAGI is adjusted gross income
as figured on their federal income tax returns before subtracting
any deduction for student-loan interest. If you can claim the deduction,
then you can share part of your tax refund with your daughter.
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