Student Loan Inteerst Deduction

[S T]

Parents obtain student loans part Parent/Part Student for Tuition - College

One of the parent loans is in the name of the Mother only - and now daughter will take over the payments - however, it seems that the Student Loan Lending Agency will not change the loan from parent to student and thereby the Student Loan Interest statement 1098E will be issued in the Mother's Name and SSN

Is it possible to nominee this Student Loan Interest to the daughter, much the same way we can accomplish with interest received???

Or is there an alternative ?

thanks

Sandy

[DaveinTexas]

The child must be liable for the loan

An alternative for the daughter is to refinance the loan, if possible, to her name. Or, the daughter can, if permissible, co-sign the loan which would make her liable for the loan.

In the current situation, if the daughter repays the loan and she is not liable for the debt, then no one can claim the interest, even if the 1098E is in the Mother's name/SSN.

OR, the daughter can gift the funds to the mother to repay the loan (watch the gift tax limits), then the mother repays the loan, THEN the mother can claim the interest on her return. Mother can wait til tax time, figure the tax savings, and if she is feeling generous, gift the savings to her daughter.

Just my 2 cents, spend it wisely.

[S T]

Dave In Texas

Thanks for this insight or possible solution

Difficult arriving at a solution, as the daugher and Mother have been estranged the last year or two, now the parents divorced in 2013, Mother is scrambling to rebuild her life on limited income, father (ex-spouse) won't cooperate, and daughter is finally working, will take on the Mother's responsibility of that part of the parent loan and daughter working at rebuilding the relationship with the Mother

Why do I get these issues - I never majored in pyschology or counseling - I really only want to prepare taxes

Thanks,

Sandy

[buzzardbreath]

Can't Escape

Why do I get these issues - I never majored in pyschology or counseling - I really only want to prepare taxes

You can't do this for a living without getting into those issues. You can't get any closer to someone than to get into their billfold. You will know things about your clients that their next-door-neighbors will never know.

The lending institution will happily accept another signature to be responsible for the loan. But it will not remove mother's signature -- why would they have only one party responsible than two?? Same situation when people divorce and decree makes one person responsible for paying the mortgage -- the decree is one factor but if both spouses are on the mortgage, the mortgage company is not going to relieve EITHER PARTY until loan is paid off.

I guess I would make sure daughter is jointly responsible for the loan, and if mother gets a 1099-E, then make sure daughter gets a 1099-E nominee statement for the AMOUNT THE DAUGHTER ACTUALLY DOES PAY. Notice the emphasis, as too many times parents come through and pay obligations on behalf of their children when they fall behind.

Nothing is messier than domestics. Ask any cop.

[Kram BergGold]

a correction I think

If a parent pays a child's student loan directly then the child gets to deduct the interest as it is a gift subject to gift tax. Therefore, I would assume the reverse holds true. If the child pays the loan that the Mom is obligated to pay, then the Mom gets to take a tax deduction. So one hting is the Mom could pay back to the child the tax break if they ever start talking.

[Burke]

You can't do this for a living without getting into those issues. You can't get any closer to someone than to get into their billfold. You will know things about your clients that their next-door-neighbors will never know.

You are so right about that. I feel like a priest sometimes with confidentiality issues. When all I want to do is call the son/daughter/parent/ responsible relative and say, "You need to get over there and address this situation!" When I think about the money that would have saved the taxpayer or heirs.........

Nothing is messier than domestics. Ask any cop.

[Burke]

Is it possible to nominee this Student Loan Interest to the daughter, much the same way we can accomplish with interest received???Sandy

The other posters have stated, correctly, that this cannot be done if the other person is not legally liable for the debt, just as interest received cannot be nomineed unless it is a joint account. I have seen it done, however, but it is illegal to try and shift income or deductions to another taxpayer. I even had a TP go get his authorization to do so notarized, thinking that would make it legit. The payor of the income thought it did, since it authorized him to pay it to another party. It didn't. The payor still had to give the original TP a 1099MISC.

[S T]

Thanks for the info, I apologize, I think I was having a "meltdown" moment, too many clients, with too many issues.

Of course I know I have to deal with all of the why, wherefore's and listen to all of the he said/she said. Part of that is why I retain "clients" for over 20 + years,Too many phone calls and too much "drama"

So back on on track, managed to get a couple of clients, back on track to file these "d" returns for 10/15/2013 on extension.

I don't see anyway to "nominee" the Student Loan Interest - and the Client is finding out from the "Lender" there is no way to substitute the responsible party. (And on the loan in question is a parent loan with "one parent")

I was fact finding for tax purposes from others on the Board that might have encountered a similar situation - the client will have to look at the legal/financial responsibilities,

Thanks for all your thoughts,

A Better Day!

Sandy