Student Loan Interest Deduction

Student loan interest is a tax deduction found in the adjustments to income section of Form 1040 or 1040A. That means you can take this deduction even if you don't itemize, or even in addition to any itemized deductions.

You can deduct student loan interest on loans issued for yourself, for your spouse (if you file jointly), and for your dependents.

There are income limitations for being able to claim the deduction.

Reporting Student Loan Interest

Your lender will send you a Form 1098-E. The amount of interest you paid on your student loans for the year will be reported on Form 1098-E, box 1.

Limits

The maximum amount of student loan interest you can claim as a tax deduction is limited to $2,500.

The deduction is also limited by your total income. If your income is under $60,000 (or $120,000 for married couples filing a joint return), then you can deduct up to $2,500 in student loan interest.

If your income is over $60,000 but under $75,000 ($120,000 to $150,000 for married people filing jointly), then your deduction for student loan interest will be prorated.

If your income is over $75,000 ($150,000 MFJ), then your student loan interest is not deductible at all.

These phaseouts for the deduction will be the same for 2010 and for 2011, and the limitations are described in more detail in IRS Publication 970. Tax software will calculate the deductible portion of your student loan interest, or you can use the worksheet found in Publication 970.

Planning Ahead for 2013

The deduction for student loan interest will continue to be available to every person who is legally obligated to repay a student loan through the year 2012. Starting with the year 2013, the deduction will revert to an older law in which student loan interest will be deductible only for the first 60 months of repayment.