Plus loan interest

[Margaret CPA in OH]

Client has interest for a Plus loan for wife's daughter. Daughter is not a dependent of client and wife. Where does the loan interest belong? It looks as if I have to confirm who is legally obligated to pay (Pub. 970)regardless of whose name is on the 1098E, correct?

[Terry D EA]

Student loan interest is only deductible for taxpayer, spouse or dependents. If the person for whom the education loan is for cannot claimed as a dependent or is not the spouse or taxpayer, then the interest is not deductible regardless of who is responsible to repay the loan.

[Lion EA]

When a parent takes a PLUS loan and takes ten years to repay, does that mean he can no longer deduct the loan interest after his child graduates and is no longer his dependent, can only deduct while a dependent? Of do they have to be a dependent only at the time the loan is made?

Which brings up another question: if divorced parents are alternating years, then the parent's PLUS loan interest can be deducted in only alternating years also?

[Margaret CPA in OH]

But Pub 970, page 29, says "Student loan interest is interest you paid during the year on a qualified student loan. ... Qualified Student Loan - This is a loan you took out solely to pay qualified education expenses (defined later) that were:

* For you, your spouse, or A PERSON WHO WAS YOUR DEPENDENT WHEN YOU TOOK OUT THE LOAN (my emphasis).

From that I take it that I input the amount for the filer (student's mother's husband) if he is legally responsible for the loan. That I will have to check. They filed jointly so student was his dependent although not related.

[LindaB]

But Pub 970, page 29, says "Student loan interest is interest you paid during the year on a qualified student loan. ... Qualified Student Loan - This is a loan you took out solely to pay qualified education expenses (defined later) that were:

* For you, your spouse, or A PERSON WHO WAS YOUR DEPENDENT WHEN YOU TOOK OUT THE LOAN (my emphasis).

From that I take it that I input the amount for the filer (student's mother's husband) if he is legally responsible for the loan. That I will have to check. They filed jointly so student was his dependent although not related.

I was just working on one of these too, I read it that if the taxpayer took out the loan and is responsible for repayment, and took out the loan when the student was his dependent, then the taxpayer can take the deduction as long as he is paying off the loan, even if the student is no longer his dependent.

[Margaret CPA in OH]

Thanks, LindaB. I will just clarify who is actually responsible for repayment. Between us, I believe the student's mother is actually repaying and cannot fathom how her husband got on this. (I know a little too much about the family finances...)

[LindaB]

Don't know if this applies to your situation, but pub. 970 also says:

"If you are the person legally obligated to make interest payments and someone else makes a payment of interest on your behalf, you are treated as receiving the payments from the other person and, in turn, paying the interest.

[Jack from Ohio]

Way too much overthinking here.

A person cannot get a PLUS unless he/she has a student in post secondary education.

A person cannot get a Stafford (subsidized or un-subsidized), Perkins or private student loan unless they are a student in post secondary education.

Whomever's name is on the note can claim the student loan interest unless phased out for other reasons.