8

This question is hypothetical.

I was unemployed for the entire year of 2018 and had no income. I lived with a parent and had enough savings from a previous job to pay for myself and make all of my student loan payments.

I paid about $2,000 in student loan interest.

Should I file my taxes this year, and will I be able to get a tax refund in the mail? In previous years when I was employed, I filed my taxes and got a nice refund, partly because of the interest I paid on student loans.

This is in New Jersey, America.

  • 5
    Just to clarify, will your parents claim you as a dependent? – Nosjack Mar 8 at 15:59
  • 5
    "Should I file" and "Will I get a refund" are two different questions. Simple filings are free and simple to do. No downside, free, and simple things should generally be done. – corsiKa Mar 8 at 20:06
13

Student loan interest is a deduction. A deduction reduces your tax liability. If you had no income and you don't have a tax liability you can't get a refund since you didn't get more tax withheld than you have to pay.

  • 9
    if you have an IRA, convert a chunk to Roth, and deduct your student loan deduction from that tax liability. – Aganju Mar 8 at 17:46
  • If OP files, might they be able to carry that interest over to future years? – corsiKa Mar 8 at 20:06
  • 2
    Deductions reduce your taxable income if possible (i.e. if you have income to deduct from); reducing your taxable income reduces your taxes but not dollar for dollar, e.g. in the 22% bracket reducing TI $1000 reduces taxes $220. Credits directly reduce your liability. Student loan interest is not a credit, but if you are currently a student (and not claimed as a dependent) or parent of one, AOTC or LLC is a credit. – dave_thompson_085 Mar 8 at 20:09
  • 2
    @R.. since the question is hypothetical... how did the person have enough money in savings to be able to make their student loan payments? They might have savings from a career previous to going back to school. Perhaps they also have an IRA from that time in their life. – Erik Mar 8 at 22:13
  • 3
    @R.. , the OP wrote: "had enough savings from a previous job". – Aganju Mar 8 at 22:49
12

The word "refund" means "money that you previously paid and that you are now getting back". A tax refund is where you had money withheld from your paycheck (or you otherwise made tax payments), and you get some of that back. If you didn't pay any taxes, then you can't get a refund, because there's no money that you paid to refund (there are a few complications to that due to things like Earned Income Tax Credit, but since you didn't have any income that doesn't apply). If you have deductions that exceed your taxable income, they are "wasted" unless you can carry them forward.

  • 1
    In addition to requiring 'Goldilocks' income (some but not too much), EITC requires you not be a dependent or qualifying child of someone else, which this OP might be. – dave_thompson_085 Mar 8 at 20:12
  • 1
    There is such a thing as a "refundable credit", which is money that comes back to you regardless of whether you had money withheld or have tax liability. They are rare though, and it is unlikely OP qualifies for any of them given the situation they described. – Seth R Mar 8 at 20:14
1

EXAMPLE: If you paid $2,000 in interest in a year and you can demonstrate that you received $5,000 salary in a year, you would be able to say to show on your form this information and they will tax you only for the $3,000 difference.

FOR YOU: You apparently earned no money in the tax-year, but paid $2,000 in interest the tax year. This will mean you are not taxed in 2018 for income. You will not get anything from it, but it's free, easy, and very important to show: When you fill out your form and I strongly encourage you to do so, first check that you're not a dependent already, then file showing that you made no money, but you paid interest on student loans.

The reason for filing, even though you won't receive anything is that you may be interested in buying a home or something and they'll ask for your last two tax filings, etc. and you will show you did due diligence.

Bonus: if by some miracle they decide to give us a bit of relief for our outrageous student loans you can show documentation that you did everything right and by the book.

  • I have an outrageous mortgage, where's my relief? – Glen Yates Mar 8 at 22:31
  • @GlenYates - you own property. – Mikey Mar 9 at 13:48
  • It was more of a rhetorical question, the point being, that if student loans are such a burden, and therefor bad, why are they being pushed so? Student loans should be discouraged, replaced with other less burdensome programs, such as work/study programs, internships, etc. – Glen Yates Mar 11 at 16:26
0

You are not required to file a return because your income is less than the filing threshold. The IRS has a site here to check that. I did my best to guess answers, even assuming that you were able to be claimed as a dependent by someone else, and it said you did not have to file. If you do file, you will have zero liability. As others have said, you might want to file so you have a return to show people in the future. You are allowed to file for three years, so if you don't file now and it becomes an issue you can file then. You would also want to file if you had a refund coming, either because you had tax withheld (you didn't) or you had a refundable education credit coming.

protected by JTP - Apologise to Monica Mar 9 at 6:28

Thank you for your interest in this question. Because it has attracted low-quality or spam answers that had to be removed, posting an answer now requires 10 reputation on this site (the association bonus does not count).

Would you like to answer one of these unanswered questions instead?

Not the answer you're looking for? Browse other questions tagged or ask your own question.