How to take the student loan interest deduction

Some students, parents, and spouses with student loans are eligible for the student loan interest deduction. This tax break allows some student loan borrowers who took out loans for either undergraduate or graduate school to deduct up to $2,500 in paid student loan interest from their taxable income.

Given that student loans can be a financial burden for some borrowers, an opportunity to lessen the strain may be helpful.

Keep reading to find out if you may be eligible for this tax deduction and then how to claim it if you are.

What's the student loan interest deduction?

The Taxpayer Relief Act of 1997 introduced into the tax code that interest paid for student loans — up to a specific limit — would be tax deductible. Subsequently, there have been tweaks to the student loan interest deduction, though the maximum annual federal deduction — $2,500 — hasn't changed since 2001.

The student loan interest deduction in its current form allows student loan borrowers (students, spouses, and parents) who qualify to deduct up to $2,500 of student loan interest per tax year.

Keep in mind that the deduction is related to interest payments made, not the total sum of payments made on student loans. For instance, if you paid $20,000 on your student loans in 2023, and $18,000 of that went towards the principal and $2,000 was in interest, only the $2,000 would be tax deductible.

Borrowers eligible for this deduction can claim this deduction as an adjustment to income. In doing so, the tax deduction may lower someone's taxable income.

Who's eligible to utilize the student loan interest deduction?

To be eligible to utilize the student loan interest deduction, you must have a qualified student loan (this can be held by a student, a parent, or spouse who took out a loan on behalf of a student) and meet other requirements.

A qualified student loan is considered a loan that was taken out to pay for qualified education expenses, including school tuition, room and board, and other necessary educational expenses. Both federal student loan interest and private student loan interest payments may be eligible.

Other requirements to claim the student loan tax deduction include:

• You've paid interest on a qualified student loan during the tax year.
• No one is claiming you as a dependent.
• You were legally required to pay interest on your qualified student loan during the tax year.
• Your modified adjusted gross income was less than $90,000 for single filers or heads of households or less than $185,000 for those who are married and filing jointly for the tax year.
• You aren't using the 'married filing separately' status to file your taxes.

For tax filers who are either single or filing as head of household:

• You can claim the full $2,500 student loan deduction if your modified adjusted gross income (MAGI) is $75,000 or less for the tax year.
• If your MAGI is more than $75,000 but less than $90,000 during the tax year, you may still be eligible to take the deduction, but it will gradually be reduced depending on your income.
• If your MAGI is $90,000 or more, you can't claim the deduction.

For tax filers who are married and filing jointly:

• You can deduct the full $2,500 if your MAGI is $155,000 or less for the tax year.
• You can still claim the deduction if your MAGI is more than $155,000 but less than $185,000 for the tax year, but the deduction will be gradually reduced.
• If your MAGI is $185,000 or more, you can't claim the deduction.

How do you deduct student loan interest from your taxes if you're eligible?

Student loan borrowers who paid more than $600 in interest on their student loans during the filing year should automatically receive a 1098-E form from their student loan servicer. They'll receive this form either by mail, or they'll receive an email notifying them that the form is available in their online servicing portal.

If you paid student loan interest but it was less than $600, you may still be eligible for the deduction. However, you may have to ask your student loan servicer or private lender for a copy of the 1098-E form.

With that form, which you can use to confirm how much you paid in student loan interest for the tax year, you can then take the deduction on your taxes if you're eligible.

Final thoughts

If you're unsure if you're eligible or need more clarity on how to take the student loan interest deduction, you may want to consider consulting with a tax professional. Another helpful resource is the IRS website.