IRS Student Loan
Interest Deduction

What is the IRS student loan interest deduction?

Who is eligible for this? and how can you save taxes with this deduction?

The good news is that almost everybody who pays interest on their student loan is eligible for this deduction. Even if you don't itemize your deductions you can still take this deduction. Actually it's called an adjustment since it adjusts your gross income.

The maximum amount of student loan interest that can be deducted is $2,500-, so you can either use the amount of interest you paid during the year or $2,500-, whichever is smaller. If you paid more than $600- you will get a form 1098-E with the amount of interest you paid. That will make claiming the correct amount for the IRS student loan interest deduction easier for you.

To be eligible the student loan cannot be from a related person or an employer plan. Also the proceeds must be used to pay for education expenses such as tuition and fees, books, supplies, and equipment, room and board, and other necessary expenses like transportation.

The student must be either yourself, your spouse or dependent, and must be enrolled in an eligible educational institution. The student must take at least half of the normal work load in a program leading to a degree or certificate.

You cannot take this deduction if any of the following is true:

  • Your filing status is Married Filing Separately
  • A different taxpayer can claim you as a dependent on their tax return
  • Your Modified Adjusted Gross Income (MAGI) is more than $80,000 (or $165,000 if married filing jointly). If your MAGI is between $65,000 and $80,000 ($135,000 to $165,000 if married filing joint) then you will have still get the credited but it will be reduced. 

Please note: Your modified adjusted gross income in this case is your adjusted gross income without taking into account your student loan interest deduction, tuition and fees deduction, domestic production activities deduction, and any foreign income exclusion.

For more information on the IRS student loan interest deduction see Publication 970.

The house version of the Tax Cut & Jobs Act threatened to repeal the student loan interest deduction, however luckily this provision was not included in the bill in the end.

Updated January  4, 2018

Tax Help Tax Deductions > Student Loan Interest

Can't find what you're looking for? You can search this site here.
Custom Search

How will Trumps Tax Reform Affect YOU?

Check out this new calculator, to see how much you will gain or lose.

Get your exact child tax credit amount with Trump's new Family tax credit.

[?]Subscribe To This Site
  • follow us in feedly
  • Add to My Yahoo!

Subscribe to:

Wise Tax Tips

Enter Your E-mail Address
Enter Your First Name (optional)

Don't worry — your e-mail address is totally secure.
I promise to use it only to send you Wise Tax Tips.