Can You Deduct Student Loan Interest From Taxes?

The student loan interest deduction is a tax benefit that allows individuals repaying educational loans to lower their taxable income. This deduction reduces the amount of income subject to tax, which can lower your overall tax liability for the year. It is available for interest paid on qualified loans used for higher education.

Determining Your Eligibility for the Deduction

To qualify for the student loan interest deduction, you must meet several IRS requirements. First, you cannot claim this deduction if your tax filing status is married filing separately. You may be eligible if you file as single, head of household, or qualifying widow(er), as long as other conditions are met.

You are ineligible to claim the deduction if you can be claimed as a dependent on another person’s tax return. This applies even if you are the one making the loan payments. The person legally obligated to repay the loan is the one who can claim the deduction, provided they are not a dependent. For example, if a parent makes payments on a loan that is legally in their child’s name, the child may claim the deduction, but only if they cannot be claimed as a dependent.

The loan must be a “qualified student loan,” meaning it was taken out solely to pay for qualified education expenses. These expenses include tuition, fees, books, supplies, and room and board for an eligible student. The student, who can be you, your spouse, or a dependent, must have been enrolled at least half-time in a degree or certificate program at an eligible educational institution when the loan was issued.

Your ability to take the deduction is subject to income limitations based on your Modified Adjusted Gross Income (MAGI). For the 2024 tax year, the deduction begins to phase out for single filers with a MAGI between $80,000 and $95,000, and for joint filers with a MAGI between $165,000 and $195,000. You cannot claim the deduction if your MAGI exceeds these upper limits. MAGI is your Adjusted Gross Income (AGI) with certain deductions, including the student loan interest deduction itself, added back.

Calculating Your Deduction Amount

The maximum amount of student loan interest you can deduct is $2,500 per year. This limit is per tax return, not per person, so a married couple filing jointly cannot deduct more than $2,500 combined. The amount you can deduct is the lesser of the total interest you paid or the $2,500 cap.

To determine the interest you paid, refer to Form 1098-E, the Student Loan Interest Statement, which your lender must send by January 31 if you paid $600 or more in interest. The total interest paid is shown in Box 1. If you paid less than $600, you will not receive a Form 1098-E but can still deduct the interest paid by finding the total on your loan servicer’s online portal or by contacting them.

The calculation is more complex if your MAGI falls within the phase-out range. For a single filer in 2024, this is between $80,000 and $95,000. To calculate your reduced deduction, you must determine how far your MAGI is into the phase-out range and reduce your deduction by that proportion. For example, a single filer with a MAGI of $85,000 is $5,000 into the $15,000 phase-out range.

You would divide $5,000 by $15,000 to get 0.333. This decimal is the percentage of your deduction that is disallowed. If you paid $2,500 in interest, you would multiply that by 0.333, which equals $832.50. This is the amount you cannot deduct. Your final deduction would be $1,667.50 ($2,500 – $832.50).

How to Claim the Deduction on Your Tax Return

This deduction is categorized as an “above-the-line” adjustment to your gross income. A benefit of this classification is that you do not need to itemize your deductions using Schedule A to claim it. You can take the student loan interest deduction and still claim the standard deduction, which simplifies the filing process for many taxpayers.

To claim the deduction, report the calculated amount on the “Student loan interest deduction” line of Schedule 1 (Form 1040). The IRS provides a worksheet in the Form 1040 instructions and in Publication 970 to help ensure your calculation is accurate.

This amount from Schedule 1 is used to calculate your Adjusted Gross Income (AGI) on Form 1040. By lowering your AGI, the deduction reduces your total taxable income for the year.