Getting credit for student loan payments

Dear Tax Talk,
I have been paying around $100 a month for three years for my daughter’s student loan. I co-signed the loan for her, not knowing the consequences, of course. And every year, the Internal Revenue Service gives her the credit for making these payments.

Given I am the co-signer on this loan and I have been making the student loan payments, not her, why doesn’t the IRS give me the credit at the end of the year for making the payments? I can’t find an answer to this question anywhere, and trust me, I’ve looked.
— Corrine

Dear Corrine,
The problem isn’t with the IRS. The problem is with the lender. You need to let the lender know that you are making the payments and that the 1098-E reporting the interest to IRS should be issued in your name. An individual can claim an annual deduction for interest paid on a student loan. The deduction is an adjustment to gross income, which means you still get the benefit even if you do not otherwise itemize deductions.

Generally, you can claim the interest deduction for student loan payments if all of the following requirements are met.

  • Your filing status is any filing status except married filing separately.
  • No one else is claiming an exemption for you on his or her tax return.
  • You are legally obligated to pay interest on a qualified student loan.
  • You paid interest on a qualified student loan.

In addition, your daughter must have been your dependent when you took out the loan.

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