How to Get the Student Loan Interest Deduction
Updated On November 1, 2022
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The student loan interest deduction allows you to deduct up to $2,500 on your federal income taxes for qualified interest payments made on your student loans.
In this guide, we will address everything you need to know, including:
- Is student loan interest tax deductible?
- How to deduct student loan interest
- How to qualify for the student loan interest deduction
- Which student loans are eligible for the student loan deduction?
- Who doesn’t qualify for the student loan deduction?
- Can I deduct student loan payments?
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1. Is student loan interest tax deductible?
Yes, student loan interest is tax deductible on your federal income tax returns up to $2,500 of student loan interest each tax year. It’s important to note that in 2020, federal student loan interest was temporarily suspended due to the Cares Act (the financial stimulus package). This may impact your ability to deduct interest on your 2020 income taxes, since you may not have paid less student loan interest due to the Cares Act.
If you are like many student loan borrowers, then your goal is likely to pay off student loans faster. The sooner you pay off student loans, the less student loan interest you will have. If you have a choice to pay off student loans or take a higher student loan deduction, you can likely save more money by getting a lower interest rate or paying off your student loans.
2. How to deduct student loan interest
Student loan interest can be deducted for both federal student loans and private student loans. When you prepare your federal income taxes, treat student loan interest as an above-the-line deduction.
This means that student loan interest is not considered an itemized deduction. Since student loan interest is an above-the-line deduction, the amount of student loan interest you paid in a given year is subtracted from your taxable income.
Student loan interest: taxes
To deduct student loan interest on your income taxes:
- $600 or more of student loan interest: Use Form 1098-E, which you will automatically receive if you paid more than $600 of student loan interest in a calendar year.
- Less than $600 of student loan interest: If you paid less than $600 of student loan interest in a given calendar year, ask your student loan servicer for a student loan deduction form.
You can still get the student loan interest tax deduction whether you paid more or less than $600 in student loan interest in a given year (up to $2,500 total).
3. How to qualify for the student loan interest deduction
To qualify for a deduction on student loan interest:
- You must have modified adjusted gross income (MAGI) of less than $70,000 if you are individual taxpayer.
- You can receive a lower deduction if your MAGI is greater than $70,000 but less than $85,000.
- The maximum deduction you can receive is $2,500.
4. Which student loans are eligible for the student loan deduction?
Importantly, only interest paid on qualified student loans are eligible for the deduction. This includes:
- Student loans you borrowed: If you borrowed student loans for your own education, you can deduct student loan interest whether you are a current student or are no longer in school.
- Student loans you borrowed for someone else: You can get the student loan deduction if you borrowed student loans for someone else. For example, if you borrowed a Parent PLUS Loan or your dependent child, you could qualify for the student loan deduction (assuming you meet other requirements).
5. Who doesn’t qualify for the student loan tax deduction?
There are several examples in which you may not qualify for the student loan interest tax deduction. This includes:
- You earn more than $85,000 per year as an individual tax filer.
- You can be claimed as a dependent on someone else’s income tax return if you file as a single taxpayer.
- You or your spouse cannot be claimed on anyone else’s tax return if you file as married filing jointly.
- You are married and file your income taxes as married filing separately.
- You paid no student loan interest in a given tax year.
6. Can I deduct student loan payments?
When it comes to student loan repayment, many borrowers wonder whether they can deduct student loan payments. There are many ways to pay off student loans, ranging from student loan refinancing to making an extra student loan payment.
When you pay off student loans, you pay your principal balance (the amount you originally borrowed) plus any interest. You can deduct student loan interest payments on your federal income taxes. However, you can't deduct student loan payments such as paying off your principal student loan balance.