Student Loan Interest Deduction

You might be paying back loans you took to finance higher education. If so, you could qualify to deduct up to 2500 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 2500 if your modified adjusted gross income (AGI) is $130,000 or less.
  • Your deduction is gradually reduced if your modified AGI is more than $125,000 but less than $160,000.
  • You can’t claim a deduction if your modified AGI is $160,000 or more.

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

  • You can claim the full 2500 deduction if your modified AGI is $65,000 or less.
  • Your deduction is gradually reduced if your modified AGI is between $65,000 and $80,000.
  • You can’t claim a deduction if your modified AGI is $80,000 or more.

To learn more, see Chapter 4 of Publication 970: Tax Benefits for Higher Education at www.irs.gov.

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