How to Get the Student Loan Interest Deduction

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If you qualify, you can deduct up to $2,500 of student loan interest per year. When your modified adjusted gross income reaches the yearly limit for your tax filing status, the deduction will be gradually reduced and eventually eliminated altogether, according to the IRS. The student loan interest deduction is a tax benefit that can offset the costs of borrowing to pay for your education. If you paid interest during the year on a qualified student loan, you might qualify for the student loan interest deduction.

  • The income limits are adjusted for inflation, so they can change from year to year.
  • If you’re wondering, “is student loan interest deductible?
  • If you’re paying for your higher education, either by shelling out for it now or repaying student loans later, you deserve to get something back for it.
  • You must also meet certain eligibility requirements, such as having a MAGI of less than $65,000 (or $132,000 if filing jointly).

It includes both required and voluntarily pre-paid interest payments. 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 amount reaches the annual limit for your filing status. And if you receive tax-free educational assistance, like a grant, you need to subtract its amount from your qualified education expenses. But you can still take advantage of both the tax credit and the student loan interest deduction. If you have student loans, you might be eligible to claim a tax deduction for the amount of interest you pay on them.

You’re our first priority.Every time. loan interest deduction refers to the amount you can deduct from your taxable income return for interest payments made on a qualified student loan. This includes interest payments you may have made voluntarily, such as extra payments and any payments that were required. This deductible amount is the lesser value between the actual interests paid during the year or $2,500. In order to get the deduction, you actually have to pay the interest, not just accrue it.

You can’t deduct interest on loans taken out by someone else, including a relative. Nor can you deduct interest from a retirement plan loan, even if the funds were used exclusively for qualified educational expenses. Additionally, parents can’t use this deduction if they took out a loan to help pay a non-dependent student’s tuition.

Resources for tax help with student loans

It does not provide for reimbursement of any taxes, penalties, or interest imposed by taxing authorities and does not include legal representation. Additional terms and restrictions apply; See Guarantees for complete details. While the cost of college can add up, there is a potential tax deduction you can take. The student loan interest tax deduction can help make college costs more affordable. More importantly, credit cards tend to charge a much higher interest rate than student loans. If you find yourself racking up charges, you might want to consider a private student loan instead.

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That’s because The American Rescue Plan of 2021 made student loan forgiveness tax-free through 2025 — and the law covers Biden’s forgiveness, too, according toa fact sheet from the White House. President Joe Biden rolled out his sweeping student loan forgiveness plan in August, which would cancel up to $20,000 of debt for millions of Americans. His plan has since faced a number of legal challenges and is currently on hold. Transferring funds from another bank account to your Emerald Card may not be available to all cardholders and other terms and conditions apply. There are limits on the total amount you can transfer and how often you can request transfers. Pathward does not charge a fee for this service; please see your bank for details on its fees.

How to qualify for the student loan tax offset hardship refund

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You can claim the student loan interest deduction inSchedule 1, Line 33 of Form 1040. Whether you are itemizing or applying the standard deduction you can claim the student loan interest as a deduction. You paid interest on a qualified student loan in the year you claimed the deduction.

Steps to Claim Interest Deduction

Expect to receive this form by the end of January — if not, reach out to your loan servicer. You can still claim interest payments less than $600 provided you get the exact amount from your loan provider. The interest must have been paid directly by the student during the tax year and used to pay for qualified education expenses.

  • Instead of gatekeeping my knowledge, I make as much of it available at no cost as possible on this site and my other social channels.
  • So individuals who fall in the 22% tax bracket should be able to take the full $2,500 deduction or the amount they actually paid in student loan interest, whichever is lesser.
  • Whether you’re doing your taxes or you’re handing everything over to a tax preparer, the student loan interest deduction is included as an adjustment to income.
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  • For example, if you paid a total of $3,000 in student loan interest during the tax year, you can deduct up to $2,500 of that total.

For example, if you had $70,000 in How To Take Advantage Of Student Loan Interest Deductionable income last year and paid $2,500 in student loan interest, your deduction would reduce your taxable income to $67,500. However, paying more than $2,500 in interest doesn’t increase the deduction. Federal student loans, such as Direct Unsubsidized and Subsidized Loans, PLUS Loans, Perkins Loans, and FFELP loans, are all considered qualified student loans. In addition, many private student loans also qualify, though those taken from sources such as a related person or specific employer-funded plans do not. AOTC provides a credit of up to $2,500 for each year of college.

Claimed as an adjustment to your income, you don’t need to itemize deductions to take it. The IRS provides an online form to help you figure out if you’re eligible. Even if you think that you might not qualify for the deduction, it’s worth finding out for sure. The student loan interest deduction could potentially save you hundreds of dollars on your tax obligation by lowering your tax bill or boosting your tax refund. While the principal amount of your student loans is not tax deductible, the interest you pay on your student loans might be.


The rules for claiming the deduction are the same whether the interest payments were required or voluntary. A tax deduction is something that lowers your taxable income, which therefore reduces your overall tax liability. The student loan interest tax deduction is a deduction you can claim on your tax return without itemizing. If you’ve graduated and are making payments on your student loans, you may be able to deduct some of the student loan interest you’ve paid.

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