student loan interest

[grandmabee]

client daughter has student loan which they co-signed on and they paid the payments. she still is in college and they claim as dependent. but the 1098 came in daughter name and SS number. So they got a cp2000 asking because no match. I thought since they were co signers on loan and paid... it was deductable.

anyone else had this. Was my thinking wrong?

[Lion EA]

Per TTB 12-9: "If a loan is in the name of a student who is claimed as a dependent, neither the parents nor the student can deduct interest."

[jainen]

>>neither the parents nor the student can deduct interest<<

It is an odd rule. In my opinion it is not well-supported by the code (and offends common sense), but apparently nobody has successfully challenged it. Only the "primary" borrower may deduct the interest. Dependents can't deduct it in any case, while the parents can't because they aren't the primary. There is an opportunity for tax planning in applying for and using student loans.