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Tax Deductions for Voluntary Interest Payments on Student Loans

Updated for Tax Year 2019


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

Two student looking at a notebook

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.

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 2019, these income rules applied:

  • Single tax filers with a modified adjusted gross income, or MAGI, of $85,000 or more could not claim the deduction.
  • Single tax filers with an MAGI between $70,000 and $85,000 could take the deduction, but it would be reduced based on their income.
  • Joint tax filers with an MAGI of $170,000 or more could not claim the deduction.
  • Joint filers with an MAGI between $140,000 and $170,000 could take the deduction, but it would be reduced based on their income.

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