For 2007, if you are single, you can deduct up to $2,500 of interest paid on your medical school loans.

However, there are income limitations. For a single taxpayer, the phase out begins at $55,000 and ends at $70,000. This is why you can't deduct your interest payments.

One way around this, is to take out a home equity line of credit for up to $100,000. You can then use that money to pay off up to $100,000 of your medical school debt and the interest on the HELOC is income tax deductible.

However, you must look at the interest rate on your loans compared to the interest rate on the HELOC minus the tax benefits. If your loan interest rate is lower, this strategy will not work.

Needless to say, you must also own a home or apartment to do this at all.

Hope this helps.

Larry

Zip Code: 11797

Thanks for your message and advise.

I am head of household this year (single next year...since I am divorced with a child) and I don't own a house or apartment. I guess b/b I just went over the threshold of 70K this year I can't use the deduction. Thanks again

Zip Code: 22207