When inputting my student loan interest deduction for 2016, it tells me I can "deduct every single dollar" of the $1,974. However, it only deducts $300 from my balance.

[sararuecker]

Since I paid it all for 2016, shouldn't the full $1,974 come off my balance due if it's completely deductable?

[Anita01 · Accepted solution]

When you have a deduction like this, what happens is that the deduction amount is subtracted from your taxable income.  That's the difference between a deduction and a credit.  A credit amount is subtracted from your tax owed, but a deduction is subtracted from your taxable income.  Since you have less taxable income, you owe less tax.  

What you really save is the amount of tax you would have owed on that amount of income, you don't save the deduction amount itself.