When I enter my wife's student loan expenses, it totals $1,234 of 'interest deductions,' but our Federal Taxes Due only decreases by $322. Why is this?

[LindaA · Accepted solution]

Your student loan interest is an adjustment to income, so it lowers your taxable income. It is not deducted from your tax liability. 

Student loan interest and other adjustments are deducted from your total income. The result is your adjusted gross income (AGI). Your personal exemptions and standard deduction (or itemized deductions) are subtracted from your AGI. The result is your taxable income. Your tax liability is based on this value.