Dori Zinn loves helping people learn and understand money. She’s been covering personal finance for a decade and her writing has appeared in Wirecutter, Credit Karma, Huffington Post and more.

Pallavi is an editor for CNET Money, covering topics from Gen Z to student loans. She’s a graduate of Cornell University and hails from Atlanta, Georgia. When she’s not editing, you can find her practicing bookbinding skills or running at a very low speed through the streets of Charlotte.

Repaying student loans is a massive undertaking, and one that often continues years after your graduation. They can affect your financial independence and your standard of living. One area of impact, both positive and negative, that is often overlooked are your taxes.

Student loan interest deduction

When you make monthly payments to your student loans, that includes your principal payment as well as your interest payment. Whether you have private or federal student loans, the student loan interest deduction lets you reduce your taxable income up to $2,500 a year — although you might only qualify for up to the amount you paid in interest, which might be less than $2,500.

You’re eligible for the deduction if you paid student loan interest last year and you aren’t filing as “married filing separately.” If you and your spouse are filing jointly, neither of you can be claimed as a dependent on someone else’s return.

Reducing your taxable income can help lower how much you owe the government or increase how much you’ll get as a refund. You might get placed in a lower tax bracket, which might qualify you for other deductions and credits.

American Opportunity Tax Credit

The American Opportunity Tax Credit is for first-time college students during their first four years of higher education. The AOTC is 100% of the first $2,000 of qualified education expenses for each eligible student, then 25% on the next $2,000.

To claim the full credit, your modified adjusted gross income must be $80,000 or less. If your MAGI is between $80,000 and $90,000, you can still qualify for the credit, but you’ll get a reduced amount.

If the credit lowers your income tax to less than zero, you payday loans Mississippi might be able to get a refund on your taxes or increase your tax refund.

Lifetime Learning Credit

You can earn money back for qualified education expenses through the Lifelong Learning Credit. The LLC can help pay for any level of continuing education courses (undergraduate, graduate and professional degrees).

Unlike the AOTC, there’s no limit to how many years you can claim the credit. You could get up to $2,000 every year or 20% on the first $10,000 of qualified education expenses. You can use the credit to lower your tax bill, but you won’t get any of the credit back as a refund.

COVID-19 student loan deferment

Normally, if you have federal student loans in default (meaning you’re unable to pay what you owe on them for 270 days), your tax refunds can be taken to pay what you owe. However, this tax season, federal student loan deferment has been extended through . This puts student loan payments, interests and any collection activities, including taking your federal tax refund to pay your defaulted student loans, on pause. So, until May 1, your federal tax refunds are safe.

Your taxes determine your student loan payments

If you’re repaying federal student loans, including those on an income-driven repayment plan, your marriage status can impact your payments. For instance, if you’re married filing jointly, your payments are based on the new joint income between you and your spouse. If you’re married filing separately, your payments are based on only your income.

The Revised Pay As You Earn, or REPAYE, plan doesn’t distinguish between whether you’re listed as married filing separately or married filing jointly. Your payments are based on the income of both you and your spouse.

While you might get a little bit of a break if you’re married filing separately, you could miss out on other benefits. You may not be able to take advantage of a lower tax rate for married couples and claiming credits and deductions.

But if you do file jointly, the government can adjust your payment if both you and your spouse are making repayments to your federal student loans.