If you’ve started to pay back loans taken to finance higher education, you may be eligible to deduct up to $2,500 per return per year. The student loan interest deduction is taken as an adjustment to income, which means you can claim the deduction even if you don’t itemize deductions.
Student loan interest is interest that you paid during the year on a qualified student loan. A qualified student loan is a loan that you took out solely 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; and
For education provided during an academic period for an eligible student.
Loans from the following sources aren’t considered qualified student loans:
A related person.
A qualified employer plan.
For the purpose of this deduction, qualified education expenses are the total costs of attending an eligible educational institution, including graduate school, including:
Tuition and fees
Room and board
Books, supplies, and equipment
Other necessary expenses, such as transportation
Generally, you can claim this deduction if you meet all the following requirements:
Your filing status is any filing 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 and your spouse are filing a joint return and your modified adjusted gross income (MAGI) is $110,000 or less, you can deduct the full $2,500. If your MAGI is more than $110,000 but less than $140,000, the amount of your deduction is gradually reduced. If your MAGI is $140,000 or more, you can’t take any deduction.
If your filing status is single, head of household, or qualifying widow(er), you can take the full $2,500 deduction if your MAGI is $55,000 or less. If your MAGI is between $55,000 and $70,000, the amount of your deduction is gradually reduced. If your MAGI is $70,000 or more, you can’t take any deduction.
You can’t claim this deduction if any of the following statements is true:
Your filing status is married filing separately;
Someone else claims you as a dependent; or
The loan is from a related person or a qualified employer plan.
For more information, see Chapter 4 of IRS Publication 970, Tax Benefits for Higher Education.