Millions of college students have the ability to attend a university due to student loan money that they have received. Without this type of funding, many different corporate and government positions would not be filled. Over time, that would probably lead to serious problems for the standards of living and balance of power enjoyed by most American citizens.
Paying Taxes And Student Loans
If you are a student who receives funding for your education via a student loan, you may be wondering how this should be reported when you file your taxes. If you attend a private institution, you may end up having a large amount of student debt. While there is a cap on the dollar amount given by loans that are federally backed, you do have the ability to borrow as much money as you need by using private student loans.
Reporting As Income Or Not
Before you complete your taxes, you’ll need to look at the loans that you receive and read the fine print. Many of these loans are only used for specific expenses such as housing costs or tuition. If you received money from a lender for these type of expenses, you will not have to claim the funds you received as income when you file your return.
Do You Need To Claim Discretionary Expenses?
In this scenario, you are not allowed to use the money that you received for anything except discretionary expenses. The IRS would not be able to claim that you received the money as income. In addition, even if these loan funds were sent to a personal account at a financial institution where you bank, you would probably be able to avoid claiming these type of funds as taxable income. Typically, if money is lent to you for the purpose of paying for school supplies or textbooks, you can safely leave these type of funds out of the income category when you complete your return. However, you will need to make sure that you are still enrolled in school.
One item that you will need to claim are stipends that you are given. These are usually given to you instead of regular salary payments. Technically, some stipends are actually loans that are designed to help you pay for discretionary expenses. However, the way that you use these funds is usually not controlled by any loan terms. Since they aren’t subject to any mandates as to how you use them, you will have to count this type of income when you file your income taxes. This also applies to stipends that are given at the graduate level. If they don’t include any mandates as to how they must be spent, you are required to report them as regular income.
Jim Treebold is a North Carolina based writer. He lives by the mantra of “Learn 1 new thing each day”! Jim loves to write, read, pedal around on his electric bike and dream of big things. Drop him a line if you like his writing, he loves hearing from his readers!