Tax questions

April 02, 2000

Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.

My daughter graduated from college in 1999. Since then, I have been paying her college loan payments. However, the interest summaries were sent to her. Can I deduct the interest on my taxes or must she? I intend to claim her as an exemption.

For 1999, taxpayers can deduct up to $1,500 of interest on qualified education loans for college. One of the restrictions is the taxpayer must have a primary obligation to repay the loan to deduct the interest, which the parent does not have. Another restriction is that the deduction is not available to any taxpayer that is claimed as a dependent on another taxpayer's return.

Thus, you can claim the deduction only if you are legally obligated to make the interest payments. Your daughter may not claim the deduction if she qualifies as your dependent; she can claim the deduction only if the parent does not claim her. A strategy here might be to undertake a cost/benefit analysis of allowing the daughter to claim herself to take advantage of the student loan interest deduction.

Deana L. Jordan, CPA, McLean, Koehler, Sparks & Hammond, Towson

The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.

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