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Resident Taxes Question: Student Loan Interest Credit

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  • Resident Taxes Question: Student Loan Interest Credit

    Hi everyone,
    I'm a PGY3 resident and have been following WCI for sometime. I think the site is great and it has pushed me to be smarter about my finances. Despite doing my best to stay on top of them I'm worried I made a big mistake last year...

    I moonlighted quite a bit in 2015 allowing me to contribute close to $15k towards my 403b and Roth.  I was diligent to about keeping my total income below $80k and stopped moonlighting when my gross income hit ~$77k.  Unfortunately I did not count on/factor in two things:
    1) $875 State/Local refund from the 2014 tax year which I received in 2015
    2) $2706 in realized stock gains in 2015
    - In case it matters, this was from selling a stock I held for 2.5 years

    I refinanced my student loans with LinkCapital last year and in doing so payed off $36,000 in student loan interest.  Now that my gross income is over $80k I can not claim this deduction.  I've also heard that this extra $700 in income will cost me other deductions as well.  Is there a way to manipulate my income to get me below $80k?  Can I defer income to next year some how?  Can I change my 2014 taxes retroactively to report the deduction for that year?
    In case it creates an opportunity, I also own my own condo.

    Any ideas? Thanks in advance.

  • #2
    Have you run this through your tax software or just doing back-of-the-envelope math?

    • Your student loan interest deduction started phasing out at $65k, so you're going to lose at least part of it.

    • Did you itemize in 2014? Some or part of the state/local refund may not be taxed, depending upon your itemized numbers. I suppose you could go back and claim the standard deduction but, since you own your own home, the tax hit probably won't be worth it.

    • Do you have an HSA and have you maxed it out?

    Without actually seeing the numbers and the interaction, it's hard to be very precise with my advice.
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


    • #3
      Thanks for the post.  I'm using TurboTax Premium and I did itemize in 2014.
      Just got back from work and someone suggested to either:
      1) Finding a loss/depreciation in 2015 to reduce my overall gross income
      2) Refile my 2014 tax return and possibly having it count towards that year
      - I dont know if either of these are possible.

      I did some reading about the student loan interest tax deduction and I think, for my sake, this is a moot point.  For those reading or curious the credit/deduction has a max of $2500.  If your income is below $65 you receive 100% of this deduction.  As your income moves from $65,001 - $80,000 the deduction is reduced proportionally or "phased out" per the IRS site and is reduced to $0 once you hit $80k.  I more or less confirmed this by manipulating my income in my tax software and reducing it to $79,500 and the credit was negligible.

      Thanks again for your post, thankfully I dont this will affect me that much and I hope this info helps someone else.


      • #4

        2) Refile my 2014 tax return and possibly having it count towards that year
        Click to expand...

        I'm not exactly sure what you mean by refiling your 2014 return to count toward that year. You're correct that your deduction is limited to $2,500 - hadn't paid attn to the amount of interest you paid off, good for you!
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


        • #5
          For others wondering, the OP figured it out: the student loan deduction isn't impressive. Many residents (particularly those moonlight) are in the phase out range, but even those able to claim the full amount aren't going to save more than a few hundred bucks.