If you are a recent college grad struggling to pay down your student debt, it may feel like you’ll never catch a break. Fortunately, there is a tax deduction that could help offset a portion of your expenses.
Learn about the student loan interest deduction and how you can claim this write-off on your tax return.
Are student loans tax deductible?
The student loan interest deduction is specific to the interest you paid on your student loan. It does not apply to your student loan principal, which is not deductible.
If you paid $600 or more in interest throughout the tax year, your lender will send you Form 1098-E. This form will report the exact dollar amount you can deduct on your tax return.
Can I claim the student loan interest deduction?
You can claim the deduction if you meet all the following requirements:
- No one claims you as a dependent
- You are legally obligated to pay interest on a qualified student loan
- Your filing status is not married filing separately
- Your modified adjusted gross income (MAGI) is less than the specified amount for your filing status
If your parents are required to pay the loan interest or they claim you as their dependent, you can’t claim the deduction. But if the loans are in your name and you are not a dependent, you can deduct the interest on your tax return. This applies even if your parents paid them for you.
You must also meet the following income requirements to be eligible for this tax break. The deduction will phase out at specific income thresholds and be unavailable at others.
| Filing status | Phase-out begins at: | Deduction unavailable at: |
| Single Head of household Qualifying widow(er) | $70,000 | $85,000 |
| Married filing jointly | $140,000 | $170,000 |
| Married filing separately | Not eligible | Not eligible |
How much is the student loan interest deduction worth?
If you meet the requirements, you can write off a maximum of $2,500 paid in student loan interest or the actual amount you deducted during the year. This depends on how much interest you paid, whichever is less.
Note: This amount eventually phases out if your MAGI for your filing status is more than the limit set for the tax year for which you are filing.
What type of interest can I deduct from my student loans?
You must use your loan to pay for tuition and fees, room and board, books, supplies, equipment, and other necessary expenses at a qualifying institution. According to the IRS, this includes any “college, university, vocational school, or post-secondary educational institution eligible to participate in a Federal Student Aid program run by the U.S. Department of Education.”
If your loan meets these requirements, then you may claim interest on the loan. You can also claim interest on the loan origination fee, capitalized interest, interest on a refinanced loan, and voluntary interest payments.
Can I deduct my credit card interest?
Interest on credit card debt may qualify for this deduction only if the credit card or line of credit was used to pay qualified education expenses only.
Can I claim the student loan interest deduction if I take the standard deduction?
Yes. The student loan deduction is an adjustment to income. You do not have to itemize your expenses to take it.
How do I claim the student loan interest deduction?
When you file with TaxSlayer, we’ll guide you through the steps for claiming the deduction. We’ll make sure you have all the information you need to get your maximum refund. You can claim this deduction regardless of which TaxSlayer product you use – even Simply Free.
This article was last updated on 12/07/2022.
