If you’re a borrower, you may be wondering, “Are student loan payments tax deductible?”
For qualifying borrowers, the answer is yes. Student loan payments ARE tax deductible. The student loan interest deduction is a federal tax break that lowers how much of your income is taxed. The federal government created this deduction to assist borrowers in paying for higher education.
To find out if you’re eligible for this tax deduction, keep reading.
The student loan interest deduction is a federal income tax deduction that allows qualifying borrowers to deduct up to $2,500 from their taxable income.
Your eligibility for this deduction depends on your filing status and income level.
The student loan tax deduction enables you to subtract up to $2,500 from your taxable income for the interest paid on your student loans. Accordingly, this deduction helps you pay less in federal taxes. The Internal Revenue Service (IRS), the federal tax collection agency, offers various tax deductions, including student loan interest deduction.
To receive the deduction, you need to claim an “adjustment to income” on a 1040 form. Fortunately, you do not have to fill out a Schedule A, which is used for itemized deductions. To make this process as quick and easy as possible, gather the following information:
If you paid more than $600 in interest on your student loan debt, your lender/loan provider will give you a 1098-E.
Note: The deduction applies only to non-federal loans that gathered interest, as the Biden administration placed federal student loans in forbearance in 2021. Learn more about Biden’s student loan forgiveness.
To qualify for the student loan tax deduction, you must meet the following eligibility requirements in income, filing status, loan timeline, and loan type.
Your modified adjusted gross income (MAGI) is your income after subtracting applicable tax penalties and tax deductions. While you can calculate your MAGI manually, online calculators can simplify the process.
To claim the student loan tax deduction, the eligible loan must have been borrowed for one of the following:
However, you cannot claim this deduction if:
The student loan must have been taken out during an academic period when you were enrolled for at least half the time at a qualifying post-secondary institution.
Additionally, it must have been used during a reasonable period after it was taken out, with loan amounts used within 90 days of the academic period.
Both federal and private student loans qualify for this deduction. However, you must have paid interest for the loan in 2019, as the student loan interest deduction was introduced in the 2020 Coronavirus Tax Relief.
Note: You can claim prepaid loan interest and origination fees for the student loan tax deduction.
If you want to skip pre-qualification and apply directly with a lender, you can do so by clicking Apply below.
Regardless of your income class, you should claim your student loan interest on taxes if you qualify. Claiming this deduction will not result in any loss, as it lowers your taxable income.
The amount of money you can save depends on your income. The following table shows the average deduction values you can expect, based on your income class.
Income Class
Deduction Value
Below $10,000
$214
$10,000 to $20,000
$89
$20,000 to $30,000
$136
$30,000 to $40,000
$142
$40,000 to $50,000
$155
$50,000 to $75,00
$213
$75,000 to $100,000
$183
$100,000 to $200,000
$214
$200,000 and over
$74
If you qualify for the student loan interest deduction, be sure to claim the adjustment on your 1040 tax form. Doing so will reduce your taxable income. Accordingly, it will reduce the amount of taxes you owe.
