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Interest Student Loans Tax Deductible

Interest Student Loans Tax Deductible

If you’re paying off student loans, you might be able to deduct the interest you pay on those loans. Here are some answers to common questions about the student loan interest deduction.

Student Loan Interest Deduction Tax Rate

Student loan interest paid during the tax year is generally deductible if you itemize deductions. However, you cannot deduct expenses for student loan payments you deduct as a student loan repayment deduction.

In addition, you cannot claim this deduction if your filing status is married filing separately or head of household.* You may be able to take the student loan interest deduction if all of the following apply:

  • You’re legally obligated to pay interest on a qualified student loan. If a parent paid part of your qualified education expenses and is claiming an education credit for their payments (for example, by completing Form 8863), then that parent’s payment isn’t considered a qualified expense and any part they paid toward your qualified education expenses won’t be considered in figuring out whether your total payments were more than $57,000 or less than $57,000 even though it was used to pay for your eligible education costs.*

Student Loan Interest Deduction Limits

Your deduction for student loan interest is limited to the amount of your adjusted gross income (AGI) that exceeds $65,000 if you are married filing jointly or qualifying widow(er), and $315,000 to be considered single. If you are married filing separately and your spouse itemizes deductions on a separate return, the deduction limit is half the above amounts.

In order to qualify for the deduction, you must take out a qualified student loan to pay for college expenses such as tuition fees and room & board. In addition, the repayment must begin within 60 days after graduating from school or within 120 days if you work toward a masters degree or doctorate program at an eligible institution based in an area with high unemployment rates.

The IRS requires that only payments made up until December 31st count towards qualification purposes; any payments made after that date can’t be included in this year’s total even though they may have been taken out during previous years’ tax returns (ie: 2018).

Parent’s Student Loan Interest Deduction

In some cases, parents can deduct interest paid on a student loan. If you are responsible for paying your child’s college tuition and expenses and you take out a loan to help pay for those expenses, then you can deduct up to $2,500 in interest payments each year. However, this deduction only applies if the student is your son or daughter (or in some cases grandchild) who is under 24 years old at the end of the tax year.

To qualify for this deduction:

  • You must be legally obligated to pay back the loan;
  • Your child must be enrolled at least half-time in a degree program at an eligible institution;
  • The school’s academic year must last longer than six months

Can I claim the student loan interest deduction?

You can claim the student loan interest deduction if you are legally obligated to pay the interest on a qualified student loan. You must have paid interest on a qualified student loan in order to claim this deduction. If your employer pays your student loan interest, then you can’t take this tax break.

You must have paid the interest for the tax year in which you are filing your federal income taxes. For example, if you didn’t begin repaying your student loans until January 2019, but had been making payments since May 2018 at an earlier job, then those payments would not count as having been paid in 2019 (unless they were also made during that year).

The student loan interest deduction can help offset the cost of repaying your loans.

The student loan interest deduction can help offset the cost of repaying your loans.

You may be able to deduct up to $2,500 in student loan interest each year if you paid it during the tax year. If you’re married, filing a joint return, and both you and your spouse paid student loan interest during the tax year, each of you can deduct up to $2,500 on separate returns (so your combined deduction is $5,000). You can also claim an additional “above-the-line” deduction for any amount of qualified education expenses that were not paid with tax-free funds from scholarships or grants. You’ll need to fill out Form 1098-E if you received one or more Education Credits for your qualified tuition and related expenses (Section 2).

The student loan interest deduction can be a great way to offset the cost of repaying your loans. In order to qualify, you need to have qualified education loans and meet certain income limits. You may also qualify if you are married and file jointly with your spouse as long as they also have qualifying student loans. If all of these requirements are met, then you can claim this deduction on Schedule A of Form 1040 when filing taxes for 2019 (or Form 1040A).