There is doubt that understanding of tax law in various states and provinces is certainly a tough job. It is all the more difficult for young students who are just getting a hang of things. If any student in such a situation is handed over a tax form and is asked to fill it, he or she would most certainly be confused and overwhelmed. However, there is no denying the fact that ignorance cannot be considered to be an excuse for not adhering to the tax laws and abiding by it. We are happy therefore to share some useful tips that we believe could be useful for planning the tax liabilities and also be aware of the various tax break options that one might have. The information that is being shared below has been given based on the current tax laws and this we are sure would be useful in more ways than one.
1. Benefits For Disabled Students
There are some tax deductible benefits for all those disabled students in the country as far as 2019 is concerned. This facility was not available till 2018. Previously the discharged student loan was considered as an income and the students were taxed on the same. However, if we are to go by the recent legislation any student who has federal student loan disability discharge facilities offered to him as on January 1, 2018 will no longer be considered as taxable income. Hence, when preparing the tax bill this point should be kept in mind.
2. Tax Deductions On Student Loan Interest
As per the current federal tax code, student loan borrowers are permitted to claim a part of their student loan interest as deduction, for the year. This amount of interest deductible could be found out from the form 1093-E that is available from the lender. However, the student loan interest deduction is not very big and is very minimal to say the least. But it does add to the overall savings as far as taxable income is concerned.
3. Impacts Caused By Shutdowns
If there is partial government shutdown, the IRS would be working with a truncated staff. It could impact a few student loan borrowers. It could impact those students who need some documents to file tax return and also get information about income taxes and also get to know more about the latest rules pertaining to federal tax. Such situations could be brought to the attention of the authorities and it could be helpful for getting time for the tax year in question. This is a part of the facilities available under federal student loans and the same should be taken into account.
4. Marriage Considerations
If you have been recently married, you could get some benefits under the federal tax law. If you are able to understand the laws and take advantage of the same you could get quite a few benefits as far as the taxable income and tax computation is concerned. You must get in touch with your tax lawyer so that you are able to take advantage and benefits of the same as much as possible.
5. Divorce Considerations
While there is no doubt that marriage can have an impact on your repayment option as far as student loan debt repayment is concerned, you also get some other benefits if you have to go through a divorce from your husband/wife. You are not constrained under the law to show details of your spouse’s income. However, this is applicable only if the divorce has taken place recently. This could also have some impact on the various other tax benefits too.
6. Reduction Of Adjusted Gross Income
There are some income driven plans such as PAYE, REPAYE, and IBR and these could also have an impact on tax. Therefore if you fall under some income driven repayment plan as a student, you must take steps to ensure that you take benefits out of the same as far total tax liabilities are concerned. You must take the help and advice of a good tax consultant because these repayment plans that are tied to incomes do certainly have a number of benefits attached to it.
7. Student Loans That Are In Default
Before going in for file joint as a student loan borrower you should bear in mind that the tax authorities can intercept your federal tax refunds. This is very much possible under the law if you have student loans that are in default. This falls under the domain TOP or Treasury Offset Program. The tax authorities can adjust the tax credits as far as the internet and principal components are concerned. However, penalties and collection charges cannot be appropriated again such tax refunds. This is an important point that you must always bear in mind as a student when it comes to understand the tax code.
8. Negotiated Settlements Or Loan Waiver
Though student loan waivers are impossible, there could be a few loan forgiveness program or a student loan forgiveness program that could come in handy. Here you will get benefits as far as the entire loan and principal amounts are concerned. There could be very instances where even the tax component could be reduced a bit.
9. Importance Of Professional Help
Finally, you must understand the importance of choosing professional help and also understand the importance of presenting the case properly. It calls for a good writer and there are many who could be in a position to offer their services. Taking help from service providers like Rapid Essay could also be a good idea. While tax consultants can help in providing information about taxes, professionals like Rapid Essay could help with the neat and meaningful presentation.