Loan payoff Tax-Deductible???

[@70mphC2005--->]

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Is it true paying off your loan is tax-deductible, or are some people who are just trying to ease my mind by telling me this?

So after residency, most of us will probably in the high-tax paying bracket. But if I'm forking up a huge yearly payments to pay-off loans, does this mean I may pay less taxes??

 

[Andrew_Doan]

Originally posted by @70mphC2005--->
Is it true paying off your loan is tax-deductible, or are some people who are just trying to ease my mind by telling me this?

So after residency, most of us will probably in the high-tax paying bracket. But if I'm forking up a huge yearly payments to pay-off loans, does this mean I may pay less taxes??

Only the interest paid is tax deductable, and only up to a certain amount.

 

[edmadison]

The doanster is correct. Only interest is deductable (not counting your lifetime learning credit). Not only that, you can only deduct 2500 in interest per year. But wait, it gets worse. The phase out for loan interest starts about $65,000 so once you become an attending you will lose your loan deduction. Take home message: pay off 2500 in loan interest each year as a resident and claim the government handout.

Good news: the interest deduction is above the line, meaning that you don't have to itemize to get it!

Ed

 

[@70mphC2005--->]

Thankyou,

Your inputs are very helpful!