Can Parents Deduct Student Loan Interest?

The student loan interest deduction offers a way to lower taxable income, but families are often unsure how it applies when parents make payments on a child’s loan. This deduction allows taxpayers to subtract interest paid on student loans, up to a certain limit, from their income. Understanding who can claim this deduction depends on several IRS factors, with the primary one being legal liability for the debt, not just who makes the payment.

Core Eligibility for the Student Loan Interest Deduction

The maximum amount of student loan interest that can be deducted in a single tax year is $2,500. This is a deduction that lowers the amount of your income subject to tax, and it is subject to income limitations based on your modified adjusted gross income (MAGI).

For the 2025 tax year, the deduction begins to phase out for single filers with a MAGI between $85,000 and $100,000. For those married filing jointly, the phase-out range is $170,000 to $200,000. You cannot claim the deduction if your MAGI exceeds these upper limits.

To qualify, several other rules apply.

• The interest must be paid on a qualified student loan, which is a loan taken out solely for qualified education expenses.
• The loan must be for you, your spouse, or a person who was your dependent when you took out the loan.
• Your tax filing status cannot be married filing separately.
• You cannot be claimed as a dependent on someone else’s tax return to claim the deduction yourself.

Determining Who Can Claim the Deduction

A parent’s ability to claim the student loan interest deduction depends entirely on who is legally obligated to repay the debt. Legal liability, not the act of making payments, dictates the tax treatment.

If a parent is the legal borrower, they are eligible to claim the deduction. This is common with federal Direct PLUS Loans for Parents or when a parent is a co-signer who is equally and legally responsible for the debt. The parent can deduct the interest they pay, provided they meet other requirements like the MAGI limits.

A more complex situation occurs when the student is the only person legally liable for the loan, but a parent makes payments as a form of support. Even if a parent pays all the interest for the year, they cannot claim the deduction if their name is not on the loan documents. The IRS treats the parent’s payment as a gift to the child.

The child is then considered to have received that gift money and used it to pay the interest on their own loan. Therefore, the student is the only one who can claim the deduction, but they must not be claimed as a dependent on their parents’ tax return for that year. For example, if a student is legally responsible for a loan and their parent pays the $700 in interest, the parent cannot deduct it. The IRS views this as the parent gifting $700 to the student, who is then deemed to have paid the interest and can take the deduction.

Required Documentation and How to Report

The primary document needed to claim the deduction is Form 1098-E, the Student Loan Interest Statement. This form is sent by the bank or loan servicer that received the interest payments and reports the total amount of interest paid during the calendar year.

Lenders are required to issue a Form 1098-E to the borrower if they received $600 or more in student loan interest. The form is sent to the person who is legally liable for the loan, regardless of who actually made the payments. If a parent makes payments on a student’s loan, the Form 1098-E will still be issued in the student’s name.

The person eligible to claim the deduction will use the interest amount reported on Form 1098-E. Even if you paid less than $600 in interest, you are still permitted to deduct the amount you paid; you may just need to log into your loan servicer’s online portal to confirm the exact amount. This deduction is reported on Schedule 1 of Form 1040.

Claiming the deduction is an “above-the-line” adjustment to income, which means you do not need to itemize your deductions to benefit from it. You enter the allowable amount of student loan interest paid on the designated line of Schedule 1, and the total from this schedule reduces your adjusted gross income.