Tax Deductions for Your Student Loan Interest Payments

One of the best things about student loan interest is that it is tax deductible. The interest paid on student loans issued to the tax payer, his or her spouse when filing jointly, and any dependents is deductible from taxes without having to itemize, because it qualifies as an adjustment to income.

The 1098-E form

Before any student loan interest can be deducted from income, a form 1098-E will be required from the lender. This form will show how much interest on the loans was paid over the course of the year. The maximum amount of interest that can be claimed on a single return is $2,500. If you have paid more than $2,500 in interest, you will not be able to claim the rest. It may be a good idea to look into student loan consolidation to reduce the interest rates and payment amount throughout the year. Doing this will save money and could put you in the running to claim the deduction for next year.


The amount of student loan interest that can be claimed on the return is determined by the income you earn over the course of the year. Here are some of the rules:

  • If you are single or married filing separately, the maximum income you can have to claim any deduction is $70,000.
  • If your income is less than $70,000 but more than $55,000, the amount of the deduction will be prorated.
  • If you make less than $55,000, you will be eligible to claim up to the full $2,500.
  • If you are married filing jointly, you can make up to $115,000 before the deduction gets reduced.
  • If you make between $115,000 and $145,000 the deduction will be prorated.
  • If you make over $145,000 you will not be eligible for the credit.

How to Claim the Deduction

Fill in the amount of interest paid as presented on line 1 of the 1098-E form, onto line 33 of Form 1040 or on line 18 of Form 1040A. When filing the return include the 1098-E form. If filing your return electronically, keep the 1098-E on hand in case of an audit. Keep in mind the IRS will receive a copy of this form as well.

Student loan interest can be a hassle, but being able to deduct a large portion of the interest each year keeps the loans manageable and in many cases will make the loans interest free in the end. As there are credits and deductions available to help people go back to school, this deduction is able to help people repay the funds they used to go to school in the first place. If you have any questions or concerns about the student loan interest tax deduction, speak to your student loan servicer or to a tax professional. The information provided here is for informational purposes only and should not be construed as professional advice because every situation is different.