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.
Key takeaways on the student loan interest deduction
- Depending on your income and filing status, you can deduct up to $2,500 in student loan interest paid during the year.
- You must have paid interest on a qualified student loan for yourself, your spouse, or a dependent, and your income must fall within the eligibility limits.
- Typically, you’ll use Form 1098-E from your loan servicer to report your loan interest information.You’ll claim the deduction on line 21 of Schedule 1 on Form 1040.
Is student loan interest deductible?
Yes. 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.
What type of student loan interest can I deduct?
To qualify for the student loan interest deduction, the loan itself must meet certain requirements. You must use your loan for:
- Tuition and fees
- Room and board
- Books, supplies, and equipment
- Other necessary expenses
According to the IRS, this applies to 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.
Loans that do not qualify for the student loan interest deduction include:
- Loans from a relative or employer
- Loans that were not used for qualified education expenses
- Loans that were combined with other types of debt (like credit cards)
- Loan was taken out after the education period ended
Who qualifies for 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. As your income increases within the phase-out range, the amount of interest you can deduct gradually decreases. Once your income exceeds the upper limit of that range, the deduction is no longer available at all.
| Filing status | Phase-out begins at: | Deduction unavailable at: |
| Single Head of household Qualifying widow(er) | $85,000 | $100,000 |
| Married filing jointly | $170,000 | $200,000 |
| Married filing separately | Not eligible | Not eligible |
How much student loan interest can you deduct?
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.
How to claim the student loan interest deduction
To claim the student loan interest deduction, you’ll need to report the amount of interest you paid during the tax year – up to a maximum of $2,500 – on your federal tax return. If you paid more than $600 in interest, your loan servicer should send you Form 1098-E, which shows the total interest paid. You’ll use this form to enter the correct amount on line 21 of Schedule 1 on Form 1040.
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.
Other frequently asked questions about the student loan interest deduction
Here are answers to some of the most frequently asked questions about the student loan interest deduction to help you understand how this tax break works.
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.
Are student loan payments tax deductible?
You can only deduct the interest portion of your student loan payments – not the full payment amount. The IRS allows up to $2,500 per year in student loan interest to be deducted, depending on your income and filing status. The principal portion of your payment is not deductible.
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 deduct student loan interest on my state tax return?
Yes, you may be able to deduct student loan interest on your state return. States like New York, Illinois, and Georgia follow federal rules and allow the same deduction. Massachusetts provides a separate deduction for undergraduate loan interest, while Minnesota offers either a credit or deduction based on income. However, California does not allow any deduction. Always check your state’s Department of Revenue website for the most accurate information.
