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New Member
posted Jun 3, 2019 4:34:49 PM

Why isn't turbo tax deducting the full amount of my student loan interest in the "federal tax due" window?

When I enter $1,200 of student loan interest paid, the tax due window only goes down by a couple hundred dollars.  I understand that it should deduct up to $2500

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1 Best answer
Alumni
Jun 3, 2019 4:34:51 PM

A student loan deduction is a deduction, not a credit. It does not reduce your tax dollar for dollar. It reduces your tax by reducing your taxable income. The maximum benefit you get from a deduction is the amount of the deduction times your marginal tax rate. For example, if you are in the 25% marginal tax bracket, a $1,000 deduction reduces your tax by, at most, $250.
The maximum student loan interest deduction that you can claim is $2,500 per tax return.

1 Replies
Alumni
Jun 3, 2019 4:34:51 PM

A student loan deduction is a deduction, not a credit. It does not reduce your tax dollar for dollar. It reduces your tax by reducing your taxable income. The maximum benefit you get from a deduction is the amount of the deduction times your marginal tax rate. For example, if you are in the 25% marginal tax bracket, a $1,000 deduction reduces your tax by, at most, $250.
The maximum student loan interest deduction that you can claim is $2,500 per tax return.