Tax credits are available for student loan interest, even if your wages are being garnished.
Tax credits are available for student loan interest, even if your wages are being garnished.

If you default on your student loan, the federal government has the right to garnish your wages and even to seize your tax refund. Wage garnishments come from your net pay, after your payroll and other taxes have been deducted. When you file taxes at the end of the year, report your gross income, just as you would if no wages had been taken. There is no special place to distinguish garnished wages, as there are no credits or special tax considerations for this income.

Gather together all W-2s for any job that you worked during the year. These will show your gross income, regardless of garnishment, as well as any taxes that you paid. Include this gross income on the appropriate line of your Form 1040, 1040A or other form you are using to file your personal income taxes.

Collect documentation showing any student loan interest that you may have paid. Your loan provider should send you a form showing what you paid for the year. If you don't, you can request the information be sent to you. Include this information on line 33 of Form 1040, if you're using that form to file your personal income taxes.

If you paid educational expenses in that tax year, file a form 8863 for either the American Opportunity Credit or the Lifetime Learning Credit. Payments toward student loans, even those that are being garnished from your wages, don't count for these credits. The payment must be made for qualified education charges, such as tuition, for that tax year. If you qualify for either of these credits, they can offset your tax burden.