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Payment Date Payment Stated Interest Principal November 2022 $200.51 $44.27 $156.24 December 2022 $200.51 $43.62 $156.89 Totals $401.02 $87.89 $313.13 To determine the amount of interest that could be de- ducted on the loan for 2022, you start with the total amount of stated interest you paid, $87.89. Next, allocate the loan origination fee over the term of the loan ($300 ÷ 60 months = $5 per month). A total of $10 ($5 of each of the two principal payments) should be treated as interest for tax purposes. You then apply the unpaid capitalized in- terest ($625) to the two principal payments in the order in which they were made, and determine that the remaining amount of principal of both payments is treated as interest for tax purposes. Assuming that you qualify to claim the student loan interest deduction, you can deduct $401.02 ($87.89 + $10 + $303.13). For 2023, you will continue to allocate $5 of the loan origination fee to the principal portion of each monthly payment you make and treat that amount as interest for tax purposes. You will also apply the remaining amount of capitalized interest ($625 − $303.13 = $321.87) to the principal payments in the order in which they are made until the balance is zero, and treat those amounts as inter- est for tax purposes. Don't Include as Interest You can't claim a student loan interest deduction for any of the following items. • Interest you paid on a loan if, under the terms of the loan, you aren't legally obligated to make interest pay- ments. • Loan origination fees that are payments for property or services provided by the lender, such as commitment fees or processing costs. • Interest you paid on a loan to the extent payments were made through your participation in the National Health Service Corps Loan Repayment Program (the NHSC Loan Repayment Program) or certain other loan repayment assistance programs. For more infor- mation, see Student Loan Repayment Assistance in chapter 5. When Must Interest Be Paid? You can deduct all interest you paid during the year on your student loan, including voluntary payments, until the loan is paid off. Can You Claim the Deduction? Generally, you can claim the deduction if all of the follow- ing requirements are met. • Your filing status is any filing status except married fil- ing separately. • No one else is claiming you as a dependent on their tax return. • You are legally obligated to pay interest on a qualified student loan. • You paid interest on a qualified student loan. Claiming you as a dependent. Another taxpayer is claiming you as a dependent if they list your name and other required information on page 1 of their Form 1040, 1040-SR, or 1040-NR. Example 1. During 2022, you paid $600 interest on your qualified student loan. Only you are legally obligated to make the payments. No one claimed you as a depend- ent for 2022. Assuming all other requirements are met, you can deduct the $600 of interest you paid on your 2022 Form 1040 or 1040-SR. Example 2. During 2022, you paid $1,100 interest on your qualified student loan. Only you are legally obligated to make the payments. Your parents claimed you as a de- pendent on their 2022 tax return. In this case, neither you nor your parents may deduct the student loan interest you paid in 2022. Interest paid by others. If you are the person legally ob- ligated to make interest payments and someone else makes a payment of interest on your behalf, you are trea- ted as receiving the payments from the other person and, in turn, paying the interest. Example 1. You obtained a qualified student loan to attend college. After graduating from college, you worked as an intern for a nonprofit organization. As part of the in- ternship program, the nonprofit organization made an in- terest payment on your behalf. This payment was treated as additional compensation and reported in box 1 of your Form W-2. Assuming all other qualifications are met, you can deduct this payment of interest on your tax return. Example 2. You obtained a qualified student loan to attend college. After graduating from college, the first monthly payment on the loan was due in December. As a gift, your mother made this payment. No one is claiming you as a dependent on their tax return. Assuming all other qualifications are met, you can deduct this payment of in- terest on your tax return. No Double Benefit Allowed You can't deduct as interest on a student loan any amount that is an allowable deduction under any other provision of the tax law (for example, home mortgage interest). You also can't deduct as interest on a student loan any amount paid from a distribution of earnings made from a QTP after 2018 to the extent the earnings are treated as tax free because they were used to pay student loan inter- est. For more information, see chapter 7. For payments made after March 27, 2020, and before January 1, 2026, do not deduct as interest on a student Page 34 Chapter 4 Student Loan Interest Deduction