Generally, you can deduct interest only if you are legally required to repay the debt. But if parents pay back a child's student loans, the IRS treats the transactions as if the money were given to the child, who then paid the debt.
So as long as the child is no longer claimed as a dependent, he or she can deduct up to $2,500 of student-loan interest paid by Mom and Dad each year. And he or she doesn't have to itemize to use this money-saver.
Mom and Dad can't claim the interest deduction even if they actually foot the bill because they are not liable for the debt.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
See more tax tips for your 2016 return:
Out-of-Pocket Charitable Deductions
-
The $33,000 Retirement: One Man's Surprising Path to Financial Freedom at 61Forget what society tells you, even with less than $1 million, you can be happy in retirement.
-
The Best Aerospace and Defense ETFs to BuyThe best aerospace and defense ETFs can help investors capitalize on higher government defense spending or hedge against the potential of a large-scale conflict.
-
IRS Watchdog: Three Problems the IRS Must Address in 2025IRS The tax season is over, but new changes to the IRS can pose risks to your taxpayer experience.
-
Elon Musk and Most Taxpayers Don't Like What's in Trump's 'Big Beautiful Bill'Tax Policy President Trump is betting big on his newest tax cuts being passed by July 4. But not everyone is on board.
-
Ask the Editor, June 27: Tax Questions on Disaster Losses, IRAsAsk the Editor In this week's Ask the Editor Q&A, we answer tax questions from readers on paper checks, hurricane losses, IRAs and timeshares.
-
2025 SALT Cap Could Hurt Top 'Hidden Home Cost'Tax Deductions The GOP tax bill could make hidden homeowner costs worse for you. Here’s how.
-
No Social Security Tax Changes in Trump’s 'Big Bill'? What Retirees Need to KnowTax Policy Eliminating taxes on Social Security benefits is missing from President Trump’s tax overhaul. Here’s why and what an alternative offering could mean for retirement taxes.
-
Ask the Editor, June 20: Questions on Tax Deductions and IRAsAsk the Editor In our latest Ask the Editor round-up, Joy Taylor, The Kiplinger Tax Letter Editor, answers four questions on deductions, tax proposals and IRAs.
-
Five Surprising GOP Senate Bill Tax Changes to KnowTax Policy Senate Republicans proposed tax changes for Trump’s ‘one big, beautiful bill.” Some provisions have stirred debate.
-
$6,000 'Bonus' Tax Deduction Approved for Those Age 65 and OlderTax Reform Under Trump’s ‘big bill,’ the U.S. Senate proposed a larger bonus tax deduction for older adults than the House. Will it be enacted?
