How To Claim Your Student Loan Interest Deduction: Everything You Need To Know

If you're paying off student loans, you might qualify for the student loan interest deduction for some tax relief. This deduction is available to both students and parents who paid interest on federal or private student loans for college.

You'll need to meet certain requirements to qualify, but the deduction is easy to claim because you don't need to itemize. Here's how the deduction works.

What is the student loan interest deduction?

The student loan interest deduction applies to as much as $2,500 of interest paid by borrowers who meet certain IRS requirements. If you qualify, you can subtract the student loan interest payment amount from your modified adjusted gross income (MAGI). As an above-the-line deduction, you don't have to itemize your deductions to claim it.

You won't receive a direct refund for what you paid. You'll subtract the interest from your MAGI to reduce your taxable income and, possibly, owe less in taxes.

Any interest that you paid on eligible federal or private student loans qualifies for the deduction, and the interest can be required or voluntary interest. So, if you've been making interest payments during school, those payments can be deducted.

Who is eligible to claim the student loan interest deduction?

You'll need to meet the eligibility criteria to claim the deduction. For starters, there's an income limit, which resets annually and increases a little every year.

To claim the full allowable deduction for the 2024 tax year, your single-filer MAGI can't be above $80,000, or $160,000 if married, filing jointly. If it's between $80,000 and $95,000 as a single filer, or $165,00 and $195,000 as a joint filer, the deduction gradually reduces. You can't claim the deduction at all if your MAGI is $95,000 or more (single) or $195,000 or more (joint).

In addition to the income requirements, you'll need to meet a few other requirements, too. You can claim the deduction if:

• No one is claiming you as a dependent on their tax return.
• You paid interest on a qualified student loan in your name.
• You're legally obligated to pay interest on a student loan.
• You're married and filing jointly (can't be filing separately).
• You were enrolled at least half-time at an eligible institution when the loan was taken out.

Qualifying loans include federal loans and private student loans that were used solely to pay for qualified higher education expenses (loans from a relative or qualified employer plan don't qualify). Luckily, most education expenses, including graduate school, are eligible:

• Tuition and fees
• Housing and meal plan
• Books, supplies, and equipment
• Other necessary college costs, such as transportation

How much interest can you deduct on student loans?

The amount you can deduct depends on your income.

Full deduction

The maximum you can claim is $2,500 because the deduction is capped at that amount. In other words, if you paid $2,800 in interest, you can't claim the extra $300. If you paid less than $2,500 in interest, you'll claim that number instead. The IRS Interactive Tax Assistant tool can help you confirm you can claim the deduction and how much you might save.

Reduced deduction

If your income falls in the range of a reduced deduction (between $80,000 and $95,000 or $165,000 and $195,000 for 2024), you can figure out how much you can claim using an IRS worksheet. You can also search online for a student loan interest deduction calculator, or use tax-preparation software to determine how much of a deduction you can claim.

How to claim your student loan interest deduction

You'll need to follow a few steps to claim the deduction.

Gather your 1098-E forms

Your federal loan servicer or private lender should send you Form 1098-E, the Student Loan Interest Statement, if you paid $600 or more in interest during the tax year. If you have multiple servicers, you may receive multiple 1098-E forms, and they might be sent in the mail or by email.

If you paid less than $600, you may not receive a form, but you can likely find the tax form in your student loan account online. Check with your servicer or lender.

Calculate all interest you paid

Some types of interest, like loan origination fees or capitalized interest that was added to your loan balance when you entered repayment status, may not be included on the 1098-E. You're allowed to add those amounts to your interest total. Review IRS Publication 970 for examples of how to calculate the amount.

Calculate your partial deduction

If your income doesn't qualify for the full deduction, calculate how much you can deduct using Publication 970 for guidance.

Fill out your 1040

Form 1040 is your annual income tax return. Enter your student loan interest deduction in Schedule 1, Line 21.

Benefits and limitations of the student loan interest deduction

The student loan interest deduction can be a meaningful tax break because it may reduce your taxable income by up to $2,500. It could reduce your tax bill or boost your refund by hundreds of dollars, and might even drop you into a lower tax bracket.

But if you didn't pay much in student interest, or your income level phased out how much you can deduct, the effect on your taxes may be minimal. Still, it's worth exploring to find out what you might qualify for.