Here is some key information regarding the deduction for student loan interest. The deduction can only reduce your taxable income to zero. So, if you are already at zero, you won't see any effect on your refund amount.
How much can I deduct?
- You may deduct the lesser of $2,500 or the amount of interest you actually paid during the year.
- The deduction is gradually reduced and eventually eliminated by phaseout when your modified adjusted gross income (MAGI) amount reaches the annual limit for your filing status. For Single/Head of Household taxpayers, the deduction is phased out between $65,000 - $80,000 and $130,000 - $160,000 for Married Filing Jointly taxpayers.
You can claim the deduction if all of the following apply:
- You paid interest on a qualified student loan in the tax year 2018;
- You can take the deduction as a student, or as a parent making payments on your dependent student’s loan. However, you or your spouse, if filing jointly, can't be claimed as dependents on someone else's return.
- You're legally obligated to pay interest on a qualified student loan;
- Your filing status isn't married filing separately; and
- Your MAGI is less than a specified amount, which is set annually.