Who can claim student loan interest?

[TXcrude]

My daughter is a full-time first year student and she also had some income from a part-time job in 2023. I created a separate return for her in TurboTax.

After entering the student loan interest, TurboTax states that she is 'not eligible for an education credit since someone else can claim her as a dependent', however, the additional information also states 'If you are a parent and the loan is in your child's name, then you can't deduct the interest on your tax return even if your child is your dependent on your tax return.'

This is confusing. So no one can claim her student loan interest payments?

[Bsch4477]

If only she is liable for the loan and she is your dependent neither of you can deduct the student loan interest. 

[TXcrude]

One loan is a federal student loan that only she is liable, the other is Sally Mae with my wife as a cosigner.

Why would no one be able to deduct the student loan interest if the loan is only in my daughter's name. That doesn't seem right.

[Hal_Al · Accepted solution]

Q. Why would no one be able to deduct the student loan interest if the loan is only in my daughter's name? That doesn't seem right.

A. It's the usual reason: Congress said so. 

• "Neither you nor your spouse, if filing jointly, were claimed as dependents on someone else's return. Another taxpayer is claiming you as a dependent if they list your name and other required information on page 1 of their Form 1040"

Reference: https://www.irs.gov/taxtopics/tc456

You can deduct the interest on the Sally Mae loan, since your spouse is the co-signer (assuming you're filing Married Filing Jointly).

You have the option of foregoing  claiming her as a dependent on your return. Then she could claim the interest deduction.  But then, you would lose the $500 Other dependent credit and possibly a tuition credit.  Your student could not claim the refundable portion of the tuition credit, on her return, since she CAN be claimed as a dependent (and other reasons).