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 more about the student loan interest deduction and how you can claim this write-off on your tax return.
Are student loans tax deductible?
First thing’s first. The student loan interest deduction is specifically for the interest you paid on your student loan. This is not to be confused with 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 a Form 1098-E with the exact dollar amount you can deduct on your tax return.
How much is the student loan interest deduction worth?
If you meet the requirements, you will be able to write off a maximum of $2,500 paid in student loan interest.
Can I claim the student loan deduction?
You can claim the deduction if you meet all the following requirements:
- No one else claims you as a dependent.
- You are legally obligated to pay interest on a qualified student loan.
- You paid interest on a qualified student loan.
- Your filing status is anything other than married filing separately.
This means that 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 own return, even if your parents paid them for you.
Can I claim the student loan interest deduction for my child?
Parents of college students can claim the student loan deduction if:
- You are legally obligated to pay the interest on a qualified student loan
- You paid interest
- Your filing status is anything other than married filing separately
- You claim your child as a dependent
Who is an eligible student?
An eligible student is one who is enrolled in at least half-time in a program leading to a degree, certificate or other recognized educational credential. Note: Half-time means the student was taking at least half of the normal full-time work load.
What type of interest can I deduct for my student loans?
You must use your loan principal 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 the simple interest on the loan, the loan origination fee, capitalized interest, interest on refinanced student loans, and voluntary interest payments.
Can I deduct my credit card interest?
Interest on credit card debt may qualify for the student loan interest deduction 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 e-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 so you’ll get your maximum refund – guaranteed!
This article is up to date and accounts for tax law changes for tax year 2018 (tax returns filed in 2019). Learn more about tax reform enacted under the Tax Cuts and Jobs Act here.