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    Re: Student Loan Interest

    Posted by Mary Russell on 1/27/10

    You asked why you cannot write off more than $2500 a year in
    student loan interest. The logic of your question is spot on,
    for you made an analogy to mortgage interest, which is also
    deductible, explaining that if you were not paying on this
    student loan debt you could be paying on mortgage.

    The reason for the limit is that interest paid by individuals
    for personal expenses is not allowable as a deduction as a
    general rule. Interest on loans for personal expenses is not
    deductible because those costs are considered an extension of
    the personal items for which the money is used. If I purchase
    deodorant on my credit card the interest is not deductible. If
    I purchase wine on my credit card, the interest is not
    deductible. If I purchase a couch financed by the furniture
    store, the interest is not deductible.

    This general rule would apply to home mortgages AND to all
    student loan debts but for the exclusions to the disallowance
    rules for personal interest. These are specific policy goals
    that Congress has implemented through the tax code. They
    (although some would argue with this) do not implement a
    principle of tax logic; therefore, they are not consistent
    between exclusions. Mortgage interest deductions subsidize
    home purchases. Student loan interest deductions subsidize
    student loans. Congress has limited those subsidizes with the
    limits on the allowable deductions.

    (Actually, the student loan interest deductions are a subsidy
    on top of a subsidy since many student loans are already
    subsidized by the government.)

    Good luck!

    Posts on this thread, including this one
  • Student Loan Interest, 2/04/09, by Student Loan Interest Question.
  • Re: Student Loan Interest, 1/27/10, by Mary Russell.

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