Can I Claim the Student Loan Interest Deduction?
If you are repaying a student loan, you could qualify to deduct student loan interest of up to $2,500.00 on your tax return. A student loan is money you borrowed solely to pay qualified higher education expenses.
This means you may be able to reduce your income subject to tax even if you do not itemize deductions. Here are questions and answers to commonly asked questions:
You are eligible to take the student loan deduction if you meet the following qualifications:
- Your modified adjusted gross income* is less than $80,000 ($160,000 if Married Filing Jointly). The deduction is reduced (phased out) when your modified adjusted income (MAGI) is between $65,000 and $80,000 when filing as Single, HOH, or Qualifying Widower ($130,000 and $160,000 for filing Married Filing Jointly).
- The loan was taken out solely to pay qualified education expenses.
- The student must be you, your spouse, or your dependent.
- The student must have been enrolled at least half-time in a degree program.
- Your qualified education expenses must have been paid or incurred within a reasonable period of time before or after the loan is taken out using a federal post secondary education loan program.
- Your loan was for you to attend an eligible educational institution such as a college, university, vocational school,or other post secondary educational institution eligible to participate in a student aid program administered by the U.S. Department of Education.
*Modified Adjusted Gross Income (MAGI) is your adjusted gross income plus items such as student loan deductions, higher education deductions, IRA contribution deductions, foreign income and foreign housing deductions.
You can also use the IRS Student Loan Interest Deduction tool to determine if your loan should qualify as a deduction. You'll need to provide the following information:
- Filing status
- Basic income information
- Your Adjusted Gross Income (AGI)
- Educational expenses paid with nontaxable funds
Generally, the person whose name is on the loan gets to deduct the student loan interest. This person is legally obligated to make the interest payments on the loan.
For example, if you are legally obligated to pay the interest but someone else (such as a parent) pays it for you, it's as if you paid the interest. Therefore, you get to deduct it.
There is one notable exception to this rule: If a parent claims a student as a dependent but the student is legally obligated to pay the interest on the loan, then neither the student nor the parent may deduct the student loan interest.
The student loan interest is a deduction to income, which can reduce your income subject to tax by up to $2,500.00. A benefit of this deduction is it can be taken even if you do not itemize deductions.
You can deduct student loan interest paid during the remaining period of your student loan as long as it was taken out to pay for qualified education expenses paid or incurred within a reasonable period of time before or after you took out the loan.
If you've already gone through the step-by-step interviews, use these steps to enter Form 1098-T:
- Select Federal Taxes (Personal in the Home & Business edition).
In Online TurboTax, click the bars at the upper left corner to show Federal Taxes on the selection list; enlarge the screen if needed to show the left side selection list.
- Select Deductions & Credits and click I'll choose what I work on.
- Scroll down the Your Deductions & Credits screen until you see the Education group.
- Click Start/Update next to the Student Loan Interest Paid category.
- Follow the on-screen instructions.
You can deduct up to $2,500 interest on your joint return.
If you are married but file as married filing separately (MFS), neither can claim a deduction for student loan interest.
If you file married filing jointly (MFJ), that your deduction is reduced if your modified adjusted gross income is between $130,000 and $160,000, and eliminated if your modified adjusted gross income is more than $160,000.