Truth be told, there isn’t a whole lot to love about tax season. Every year, millions of taxpayers scramble to get their financial statements in order before that looming deadline. And while crunching numbers and scouring for receipts can cause a headache, tax season does allow for some financial introspection. With a clear view of what you spend and what you earn, you can begin drawing a roadmap for how to approach your finances in the coming year.
The world of taxes can be complicated, and unless you are an accountant or tax specialist, it may be difficult to gauge the many ways in which you can save.
For instance, did you know your student loan debt can impact your tax return? You may qualify for a student loan interest deduction, which can help reduce your tax bill. However, it’s important to first consult with your accountant or other financial professional to determine if student loan interest deduction is a suitable route for you.
How to claim student loans on taxes
Tax season takes place near the start of the year, which is a good time to get a clear picture of your current finances. This bird’s eye view of things like your income and expenses allows you to take a closer look at your discretionary spending. Doing this can help you more easily identify ways in which you can cut back and re-allocate some of your income in a way that makes sense for your unique financial goals.
And while student debt repayment can be a cause of stress for so many, it’s not all bad news. If you’ve been paying interest on your student loans, you may be eligible for tax deductions of up to $2,500. In fact, when searching how to claim student loans on taxes, you can do so as a straight adjustment to your income. To do this, you’ll need to fill out an IRS Form 1098-E, which you’ll submit when you file your taxes.
Claiming student loan interest on taxes isn’t new. If you’re not quite sure whether or not you qualify for a student loan interest deduction, don’t fret. The IRS has an online interview portal to help you determine if you are eligible.
Things to consider when claiming student loan deductions
Not only can qualifying for student loan deductions help lower your tax bill, but you may see a boost in your tax refund, as well. However, keep in mind that there are stipulations when claiming student loan interest on taxes. For example, the more you earn, the less student loan interest you’ll be able to write off. If you are earning over $70K per year, you may not even qualify for this type of deduction. If you find yourself in this situation, you can take comfort in the fact that there are other ways to save on your student loans outside of claiming student loan interest on taxes.
Refinancing your student loans may be a wise financial move, depending on the type of rate you can secure. Checking refinancing rates and keeping an eye out for the best offers on interest can help you save big money over the remaining course of your loan.
Now is a great time to explore student loan refinancing as a means of saving money on your taxes. Rates are currently at near historic lows, which can unlock the door to better financial opportunities in the future.
Why refinance student loans?
There are plenty of reasons student loan refinancing may be a good idea. Whether you want to save more money, reduce your monthly payments, or shorten your repayment term altogether, your unique financial situation will dictate whether refinancing is worth the effort. In many cases, it is.
Save money on interest
One of the most popular perks of student loan refinancing is saving money, of course. If you have good credit, you can qualify for lower student loan rates than you currently have. This allows you to save money month-to-month, but also provides big time interest savings over the life of your loan.
Lower monthly payments
It’s possible that your student loan payments are eating away at your income. If you find yourself in a difficult situation where juggling bills has become hard to manage, it’s time to explore ways to cut back. By lengthening your repayment term, you can lower your monthly student loan payments and begin allocating those funds to savings or other important expenses. This is one of the many perks you’ll find in refinancing.
Shorter repayment terms
Contrary to popular belief, there may come a time where you want to actually pay more on your monthly bill. You might choose to do this if you are making more money than anticipated and can afford to pay more toward your debt, or are hoping to clear your debt more quickly. By shortening your repayment term, you’ll pay off your student loans faster and save money on interest in the process.
How to compare student loan refinance rates
There are plenty of ways to save through refinancing. You can kick off the process by doing research on different lenders and evaluating how their rates can impact your debt repayment.
Speed up and simplify the research process with Purefy’s Compare Rates tool. In under 2 minutes, you can fill out some basic information to get a side-by-side comparison of our top partner lenders to help you determine which has the best offer for you.
Now is an excellent time to explore what student loan refinancing can do for you. Fixed refinance rates have reached historic lows, allowing you to pay less in interest and therefore save more money over time. And if you’re not sure where to begin on your refinancing journey, consider starting with our marketplace of the best lenders.
Keeping well informed about current interest rates can help you determine exactly when to refinance. Even small fluctuations, such as 1-2%, can make an impact on how much your loans cost in the long run.