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Deducting Student-Loan Interest

You might be paying back loans you took to finance higher education. If so, you might qualify to deduct up to $2,500 of interest per return per year. You can claim the student-loan interest deduction as an adjustment to income. You don't need to itemize deductions to claim it.

Student-loan interest is interest you paid during the year on a qualified student loan. A qualified student loan is a loan you took out only to pay qualified education expenses that were:

  • For you, your spouse, or a person who was your dependent when you took out the loan
  • Paid or incurred within a reasonable period of time before or after you took out the loan
  • For education provided during an academic period for an eligible student

Loans from these sources aren't considered qualified student loans:

  • Related person
  • Qualified employer plan

Qualified education expenses are the total costs to attend an eligible school. This includes graduate school. The costs include:

  • Tuition and fees
  • Room and board
  • Books, supplies, and equipment
  • Other necessary expenses, like transportation

You can usually claim this deduction if you meet all these requirements:

  • Your filing status is any status except married filing separately.
  • No one else is claiming you as a dependent.
  • You're legally obligated to pay interest on a qualified student loan.
  • You paid interest on a qualified student loan.

If you're married filing jointly:

  • You can deduct the full $2,500 if your modified adjusted gross income (AGI) is $125,000 or less.
  • Your deduction is gradually reduced if your modified AGI is more than $125,000 but less than $155,000.
  • You can't claim a deduction if your modified AGI is $155,000 or more.

If you're filing as single, head of household, or qualifying widow(er):

  • You can claim the full $2,500 deduction if your modified AGI is $60,000 or less.
  • Your deduction is gradually reduced if your modified AGI is between $60,000 and $75,000.
  • You can't claim a deduction if your modified AGI is $75,000 or more.

If you'd like to learn more, see Chapter 4 of Publication 970: Tax Benefits for Higher Education at www.irs.gov.

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