Written by a TurboTax Expert • Reviewed by a TurboTax CPAUpdated for Tax Year 2023 • March 22, 2024 4:18 PM
Important:Summarize article
This should save you ~10 minutes of reading
Important:Article Summary
This should save you ~10 minutes of reading
Important:Summarize article
This should save you ~10 minutes of reading
Important:Article Summary
This should save you ~10 minutes of reading
OVERVIEW
Most taxpayers who pay interest on student loans can take a tax deduction for the expense—and you can do this regardless of whether you itemize tax deductions on your return. The rules for claiming the deduction are the same whether the interest payments were required or voluntary.
- Who can deduct student loan interest
- Other eligibility requirements
- Claiming the deduction
Key Takeaways
- You can deduct interest paid on student loans if the loan was used to pay for qualified education expenses.
- You can deduct interest on both federal and private loans, but not on loans from a relative or from a tax-advantaged retirement plan.
- The student must attend an eligible institution and be carrying at least half-time in a program leading to a degree, certificate, or other recognized education credential for the period covered by the loan.
- The deduction for student loan interest is limited to $2,500 or the total amount of interest you paid, whichever is lower.
Who can deduct student loan interest
You can deduct interest you paid on a student loan if you took out the loan to pay expenses for yourself, for your spouse or for someone who was your dependent at the time you took out the student loan. The loan must have been used to pay "qualified education expenses." Such expenses include:
- Tuition and fees
- Room and board
- Books and supplies required by the school
- Other expenses necessary to get an education. This can include transportation to and from campus.
You can deduct interest on both federal and private loans, but not on loans from a relative or from a tax-advantaged retirement plan such as a 401(k).
Other eligibility requirements
Student loan interest is deductible only if the student and the loan meet the following criteria:
- The student attends an eligible institution. This includes any school allowed to receive financial aid from the U.S. Department of Education.
- The student was carrying at least half-time in a program leading to a degree, certificate, or other recognized education credential for the period covered by the loan. Each institution defines for itself what a "half-time" student is.
- The funds from the loan were paid out within a "reasonable" time period. The tax code doesn't define what's reasonable—but if you took out a loan and then waited several years to spend the money on education, the IRS would probably not view it as a student loan and would therefore disallow a deduction for the interest.
TurboTax Tip:
The deduction for student loan interest is classified as an "adjustment to income" and can be taken even if you claim the standard deduction on your tax return.
Claiming the deduction
The deduction for student loan interest is classified as an "adjustment to income." That means it's taken out of your taxable income before you claim most other types of deductions. And that also means you can deduct student loan interest even if you claim the standard deduction on your tax return.
Limitations and exclusions
In general, the deduction for student loan interest is limited to $2,500 or the total amount of interest you paid, whichever is lower.
People at higher incomes may not be able to claim the student loan interest deduction, or their deduction may be reduced. As of 2023, these income rules applied:
- Single tax filers with a modified adjusted gross income, or MAGI, of $90,000 or more could not claim the deduction.
- Single tax filers with an MAGI between $75,000 and $90,000 could take the deduction, but it would be reduced based on their income.
- Joint tax filers with an MAGI of $185,000 or more could not claim the deduction.
- Joint filers with an MAGI between $155,000 and $185,000 could take the deduction, but it would be reduced based on their income.
For 2024, these phaseout ranges increased to between $80,000 and $95,000 for those filing as Single and $165,000 and $195,000 for those filing as Married Filing Jointly.
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FAQs
Student Loan Interest Deduction
Are interest payments on student loans tax-deductible? ›
The student loan interest deduction is a tax break for college students or parents who took on debt to pay for their school. It allows you to deduct up to $2,500 in interest paid from your taxable income.
When can you no longer deduct student loan interest? ›
To claim the Student Loan Interest Deduction, your MAGI must be $90,000 or less for single filers and $185,000 or less for joint filers in 2023. The deduction phases out for single filers with MAGIs of $75,000 to $90,000 and joint filers with MAGIs of $155,000 to $185,000.
Does 1098-E increase refunds? ›
Student loan interest is a deduction that reduces your taxable income. Therefore, you will not see your refund increase by the amount shown on your Form 1098-E. This means that with a lower taxable income you will pay less taxes.
Can a cosigner deduct student loan interest? ›
Can I deduct student loan interest if I'm a cosigner? As a cosigner, you're only legally obligated to make loan payments if the primary borrower fails to pay. So, you can only claim the student loan interest deduction if you take over the payments for your borrower — either temporarily or for the full loan amount.
Can parents claim student loan interest deduction? ›
You can claim interest on a qualified student loan you took out for your dependent as long you meet both of these: The loan was in your name. You paid the interest on it.
Can I get a refund on my student loan payments? ›
In most cases, you'll get a refund for any overpayments beyond 20 or 25 years. The extra payments made on forgiven loans will be refunded back to the most recent of these three dates: The date you reached the required number of payments for IDR forgiveness – 20 or 25 years of monthly bills.
Does a 1098 increase the refund? ›
The form is used to determine your eligibility for education tax credits, such as the American Opportunity Credit and the Lifetime Learning Credit.By reporting Form 1098-T as income, you are essentially double counting your education expenses, which may reduce your eligibility for tax credits and increase your tax ...
Does a 1098-E help or hurt? ›
Use the 1098-E Form to figure your student loan interest deduction. You can deduct up to $2,500 worth of student loan interest from your taxable income if you meet the following requirements: You are legally obligated to pay interest on the student loans. The interest was paid by you.
How much do you get back in taxes for student loan interest? ›
At the end of each year, your servicer will send you Form 1098-E by mail or electronically. This form details how much interest you have paid on your student loan during the year. You can deduct up to $2,500 in annual interest on your tax return, subject to income limitations and other restrictions.
Neither you nor your spouse, if you file jointly, can be claimed as a dependent on another person's return. You can't deduct student loan interest payments if your parents or another person can claim you as a dependent—even if they choose not to claim you for the tax year in question.
What is the tax document for student loan interest? ›
A Form 1098-E reports the student loan interest paid during the tax year. Meanwhile, a Form 1098-T provides information about educational expenses that may qualify you, or your parents or guardian (if you're a dependent), for education-related tax credits.
How do you calculate student loan interest deduction? ›
The student loan interest deduction value varies based on your income and tax bracket. Estimate your deduction's worth by multiplying your deductible interest by your federal income tax bracket. For example, if you made $65,000 in the last tax year, your income will be taxed at the 22% rate.
Is interest on a loan tax-deductible? ›
Though personal loans are not tax-deductible, other types of loans are. Interest paid on mortgages, student loans, and business loans often can be deducted on your annual taxes, effectively reducing your taxable income for the year.
Can Julia take a student loan interest deduction of $3250? ›
True. Julia can take a student loan interest deduction of $3,250. This deduction allows individuals to deduct the interest paid on qualified student loans, subject to certain income limitations.
How do I get the full $2500 American Opportunity credit? ›
Be pursuing a degree or other recognized education credential. Have qualified education expenses at an eligible educational institution. Be enrolled at least half time for at least one academic period* beginning in the tax year. Not have finished the first four years of higher education at the beginning of the tax year.
Is paying for college tax-deductible? ›
What is considered a qualified education expense? Although key education expenses like tuition and fees are no longer tax deductible, you might be able to claim a credit by using the American Opportunity Credit or the Lifetime Learning Credit.
