Topic 456 – Student Loan Interest Deduction
You may be able to deduct interest you pay on a qualified student loan. Generally, the amount you may deduct is the lesser of $2,500 or the amount of interest you actually paid and it is subject to a phaseout, which means the amount of the deduction gradually decreases and phases out completely if and when your modified adjusted gross income (MAGI) amount reaches the annual limit.
You claim this deduction as an adjustment to income so you do not need to itemize your deductions on Form 1040, Schedule A (PDF), Itemized Deductions .
You can claim the deduction if all of the following apply:
- You paid interest on a qualified student loan in tax year 2014
- You are legally obligated to pay interest on a qualified student loan
- Your filing status is not married filing separately
- Your MAGI is less than a specified amount which is set annually, and
- You or your spouse, if filing jointly, cannot be claimed as dependents on someone else’s return
A qualified student loan is a loan you took out solely to pay qualified higher education expenses. See Publication 970. Tax Benefits for Education . and the Form 1040 Instructions (PDF) to determine if your expenses qualify.
If you file a Form 2555 (PDF), Foreign Earned Income . Form 2555-EZ (PDF), Foreign Earned Income Exclusion . or Form 4563 (PDF), Exclusion of Income for Bona Fide Residents of American Samoa . or if you exclude income from sources inside Puerto Rico, refer to Worksheet 4-1, Student Loan Interest Deduction Worksheet in Publication 970. instead of the worksheet in the Form 1040 Instructions.
If you paid $600 or more of interest on a qualified student loan during the year, you will receive a Form 1098-E (PDF), Student Loan Interest Statement . from the entity to which you paid the student loan interest.
Page Last Reviewed or Updated: May 27, 2015