If you have been paying interest on a qualified student loan, you may be eligible to deduct portions of the interest that you pay. This deduction can reduce your taxable income and help save money on your taxes. In order to qualify for this deduction, there are certain criteria your student loan must meet. The student loan must have been taken out solely to pay for qualified education expenses. To qualify for the deduction, you must have been legally obligated to pay interest on the student loan when it was incurred; however, if someone else is legally obligated to pay off your debt or if someone else pays off all or part of your debt before it comes due—for example, if they co-sign with you—then neither party would be entitled to take the deduction based on this agreement alone (but if both people are legally obligated at some point in time during which payments were actually made then both parties could take advantage of this).
Tax Deductions Student Loan Interest
If you pay interest on a qualified student loan, you may be able to deduct portions of the interest that you pay.
If you paid interest on a qualified student loan, you may be able to deduct the interest that you paid. The maximum amount of student loan interest that can be deducted is $2,500 per year.
To qualify for the deduction, your modified adjusted gross income (MAGI) must be less than $80,000 if filing single or head of household; $160,000 if married filing jointly; and $65,000 if married filing separately. If your MAGI falls within these ranges, but exceeds them by less than $10,000 ($20,000 for married couples), then only a portion of your total student loan interest may be deducted based on MAGI percentages:
- 90% of all interest up to $10k/$20k
- 80% of all interest between $10k and 40k/$20k and 80k (or twice this amount for married couples)
In order to qualify, there are certain criteria your student loan must meet.
In order to qualify for the student loan interest deduction, your student loan must have been taken out to pay qualified education expenses. The loan may be a direct student loan from the school or you may have borrowed the money from a friend or family member and then used that money towards qualified education expenses. You can also claim the student loan interest paid on any PLUS loans taken out on behalf of your child for whom you are legally obligated to pay interest.
To qualify for this deduction, your income cannot exceed $65,000 if married filing separately ($135,000 if married filing jointly).
The student loan must have been taken out solely to pay for qualified education expenses.
In order to qualify for the deduction, you must be legally obligated to make payments on a qualified student loan. All of the following conditions must also be met:
- The student loan must have been taken out solely to pay for qualified education expenses.
- The educational expenses must have been incurred within a certain period of time (generally up to four years).
- You or your spouse cannot claim the same student as a dependent on your tax return.
- The student who incurs these expenses is enrolled at least half time for at least one academic period during that year.
To qualify for the deduction, you must have been legally obligated to pay interest on the student loan when it was incurred.
To qualify for the deduction, you must have been legally obligated to pay interest on the student loan when it was incurred.
If you are a co-signer, you can deduct your share of the interest payments on your federal tax return if all three of these requirements are met:
- You were legally obligated to pay interest when it was incurred.
- The person who actually made the loan was not required to report their portion of the payment as income on their own tax return (and they did not do so).
The student or students for whom the student loan was taken out must have been enrolled at least half time for at least one academic period during the tax year.
In order to qualify for the student loan interest deduction, you must have taken out a student loan for post-secondary education. The student or students for whom the student loan was taken out must have been enrolled at least half time (at least six credit hours) for at least one academic period during the tax year. They also must be in a degree program leading to a recognized educational credential or certificate that is required by state law or by their employer.
If you meet these requirements, you can deduct up to $2,500 of interest paid on qualified student loans during each tax year ($1,000 if married filing separately).
You do not need to itemize in order to deduct your student loan interest.
The Internal Revenue Service allows you to deduct student loan interest if you don’t itemize your deductions. This means that if you take the standard deduction, which is $12,000 for a single person in 2018 and $24,000 for married couples filing jointly, you can still claim your student loan interest on your tax return.
You must meet certain criteria to qualify for this deduction:
- Your modified adjusted gross income (MAGI) must be less than $80,000 as a single filer or less than $160,000 as a couple filing jointly.
- You must have paid qualified education expenses during the year.
You can take a deduction based on your income, which will determine a maximum amount of interest you can deduct.
The deduction is based on your income, which determines a maximum amount of interest you can deduct. The maximum amount of interest you can deduct is adjusted annually for inflation and subject to phase-out based on your modified adjusted gross income (MAGI).
To figure out the maximum amount of student loan interest you can deduct:
- Take the total of all student loan interest you paid during the year and divide it by 2. This number is called “disposable income.”
- Subtract any other allowable deductions from your taxable income. These include IRA contributions, self-employed health insurance premiums, alimony payments made under divorce or separation agreements, moving expenses, unreimbursed employee expenses related to work or education and student loan payments for anyone other than yourself.* Multiply the result by 20%.
There are various benefits available to you if you have been paying interest on a qualified student loan.
There are various benefits available to you if you have been paying interest on a qualified student loan.
If you have a student loan, you can deduct the interest you pay on that loan. If you meet certain criteria and itemize your deductions, you may be able to deduct the interest paid by filing Form 8917 and attaching it to your 1040 tax return.
Closing
You can deduct up to $2,500 in student loan interest for the year. If you have a high income, this amount could be lower. The deduction is based on your taxable income, so it’s important to keep track of all of your income and deductions throughout the year.