Key Takeaways
- You should receive Form 1098-E from your lender if you've paid at least $600 in student loan interest during the year.
- To qualify for a student loan interest deduction, the loan must have been for your, your spouse's, or your dependent's education.
- To qualify for the deduction in tax year 2024, your modified adjusted gross income must be below $95,000 if you file as Single or Head of Household, or below $195,000 if you file as Married Filing Jointly.
- If Box 2 on your Form 1098-E is checked, it indicates that the reported interest amount does not include origination fees or capitalized interest from loans originated before September 1, 2004.
What Form 1098-E tells you
Your student loan lenders are required to send you Form 1098-E only if you paid at least $600 in student loan interest during the year. If you have several student loans with the same lender, the financial institution applies the $600 threshold amount to the total interest paid on all of your loans; you may get a separate Form 1098-E for each loan, though. The amount you see in box 1 reflects your total interest payments for the year.
When to deduct student loan interest
The student loan interest deduction is taken as an adjustment when calculating your adjusted gross income, or AGI. This means you don't have to itemize your deductions to take it.
To qualify, the interest payments you make during the year must be on a student loan that you took out to put yourself, your dependents or spouse through school.
For 2024, if you're filing as Single or Head of Household, your modified adjusted gross income, or MAGI, has to be less than $
95,000, or less than $195,000 if filing Married Filing Jointly, to deduct any student loan interest.
Your MAGI is essentially your adjusted gross income (AGI) with certain deductions added back in.
When you use TurboTax to prepare and file your taxes, you don’t need to do any of these calculations on your own. We’ll ask you questions in plain English, handle all the calculations, and put all of your answers on the appropriate tax forms.
TurboTax Tip:
The maximum amount of student loan interest you can deduct is $2,500, even if you paid more.
How much interest is deductible
Regardless of how much interest you paid, the maximum you can deduct is $2,500. If you're eligible to deduct student loan interest, your deductible amount goes on Schedule 1 as an adjustment to income. Your 1098-E forms will provide the amounts reported but you can also add student loan interest payments you made that aren't reported on Form 1098-E to this total as long as the interest is paid on a qualified loan.
When Box 2 is checked
If Box 2 of Form 1098-E is checked, it means that the amount reported in Box 1 doesn't include the loan's origination fees and/or any capitalized interest. Only loans you took out before September 1, 2004, however, should have box 2 checked.
An origination fee is typically a percentage of your loan that's withheld from the disbursed funds. You can include a portion of this fee as deductible interest. Dividing the origination fee by the number of years you have to pay off the loan gives you the amount you can treat as student loan interest each year. And if the lender capitalized (increased the principal loan balance) for unpaid accrued interest, you calculate the portion that's deductible each year in the same way as the origination fee.
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