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. 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:

• How do I qualify for the student loan interest deduction?
• Parents or student: Who claims the student loan interest?
• Is student loan interest a deduction or a credit?
• How long can you claim the student loan interest deduction?
• Where do you enter the student loan interest deduction?
• How do you claim the deduction when both spouses have loans? 

How do I qualify for the student loan interest deduction?  

You are eligible to take the student loan deduction if you meet the following qualifications:

• Your modified adjusted gross income* is less than $75,000($155,000 if filing joint return). 
• 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 is your adjusted gross income plus items such as student loan deductions, higher education deductions, IRA contribution deductions, foreign income and foreign housing deductions.

Parent or student: Who claims student loan interest?

Generally the right to claim student loan interest deduction goes to the person who is legally obligated to pay interest on the qualified student loan.

If you are the person legally obligated to make interest payments and someone makes a payment of interest on your behalf, you are treated as receiving the payment from the other person and paying the interest.

For example, a student is legally obligated to make payments on their qualified student loan. As a gift, the parents made the first monthly payment. No one is claiming an exemption for the student.

The student, not the parents is allowed to deduct the payment of interest on his or her return.

If a parent claims a student as a dependent and the student is legally obligated to make payments on his or her loan, then neither the student nor the parent may deduct the student loan interest.

 As a planning tool, if the parent does not claim the student as an exemption in the following year, then the student may be able to take the student loan interest deduction as long as the student is legally obligated to pay the loan.

Is student loan interest a deduction or credit?

The student loan interest is a deduction to income, which can reduce your income subject to tax up to $2,500.00. The benefit of this deduction is it can be taken even if you do not itemize deductions. 

How long can you claim the student loan interest deduction?

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. 

Where do you enter the student loan interest deduction?

Turbo Tax will guide you to enter your student loan interest during the interview.

How do you claim the deduction when both spouses have loans?

You can deduct up to $2,500 interest on your joint return.

If you are married, but file separately, neither can claim a deduction for student loan interest.

Remember if you file married filing jointly,  that your deduction is reduced if your modified adjusted gross income is between $125,000 and $155,000 and eliminated if your modified adjusted gross income is more than $155,000 .