"Student Loan" Tax Question

[tractor]

I put Student Loan in quotes because it's actually a line of credit that's in both mine and my sons name to use for tuition. He puts in a request for a draw, and the money is sent to the school. I make regular payments on the credit line to keep it at a manageable level for him. Once he graduates, the remaining balance on the credit line rolls into a student Loan on a 20-yr payment, at which time I can either keep paying for him, or make him do it.

Anyway, we still claim him as a dependent on our taxes, and take advantage of the tuition credits we receive. Not sure we are supposed to do that since the credit line is in both our names? So here's my real question, my son received the loan interest statement in his name, so I didn't deduct the interest payments from my taxes, is he allowed to use this deduction on his taxes? He made less than $5,000 last year and is a full time student.

[Angel!]

If you claimed an exemption on him on your taxes, then I don't think he can claim the interest deductions.  However, since the loan is in both names and you made the payments, you should be able to claim the interest deductions.

See:  www.irs.gov/publications/p970/ch04.html#en_US_2016_publink1000178272

[rangerj]

See Revenue Procedure (Rev Proc.)2015-53 and/or Rev. Proc 2014-61. regarding the limitations on the student loan interest deduction. Publication 17 also has information on this deduction. (irs.gov has these documents)

[haapai]

Have you attempted to calculate the student loan deduction that you might be able to take and how it would affect your federal and state taxes?  If you are affected by the income phaseout, or have a crap-ton of credits, the deduction might not be worth nearly what you think. 

I'm lazy this way.  When IRS publications give me headaches, I calculate the potential benefits of figuring out the answer before proceeding. 

[tractor]

Thanks for all the help, the deduction would give us a little more back so I will proceed accordingly.