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    prince_kuber's Avatar
    prince_kuber Posts: 2, Reputation: 1
    New Member
    		  
    #1

    Feb 6, 2010, 08:28 PM
    Student loan interest expense
    Tax Experts:

    I earned a masters degree from USA in Dec-2008. Currently, I am working in USA on H1B Visa since Oct-09. I had an education loan on my US masters degree from an Indian bank which I paid off in June 2009 during the OPT period.

    As I had an education loan from an Indian bank, I don't have form 1098-E.

    My question is : Can I get tax deduction on the interest (approx $4100) that I paid in 2009? If yes, what paperwork do I need to show/submit to IRS?

    Can I efile my tax or do I need to submit all the documents to IRS by postal mail?

    Any help in this regards would be greatly appreciated. Thanks!

    Saurabh
    MukatA's Avatar
    MukatA Posts: 7,110, Reputation: 176
    Tax Expert
    		  
    #2

    Feb 6, 2010, 10:52 PM

    You may, but there are many hurdles.
    1. Since you paid interest to a foreign bank, as a resident of the U.S. you are required to withhold 30% tax.
    2. Loan must clearly state that it was only for payment to a qualified educational institution.
    prince_kuber's Avatar
    prince_kuber Posts: 2, Reputation: 1
    New Member
    		  
    #3

    Feb 7, 2010, 12:20 PM

    Hey Mukata
    Thanks for the reply. But I am still unclear on the paperwork that I need to submit to IRS to claim the subjected deduction.

    Also can you please throw some more light on this 30% tax withhold clause? Would I able to take the standard deduction of $2500 as I paid approx $4100 in interest expense.

    Thanks in advance for your generous help here. Appreciate it!
    :-)
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
    		  
    #4

    Mar 4, 2010, 12:56 PM
    Mukat is correct about the 30% withholding requirement, but enforcement of that requirement has been spotty at best.

    I would claim the interest as student loan interest and have the paperwork that shows the loan went to qualified expenses available ONLY IF the IRS challenges the validity of the loan.
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