Is my student loan interest tax deductible?

This is a guest post by Andrew Rombach from LendEDU – a consumer education website and personal finance blog.

The student loan tax deduction is an often misunderstood write off which many people can have claim. In this article, we cover exactly what that means and how to claim it!

What is the Student Loan Tax Deduction?

The student loan tax deduction is mentioned in the adjusted gross income section of IRS Form 1040. As with other deductions, the student loan tax deduction reduces your adjusted gross income.

If you are paying back student loans, then you may be able to file for this deduction and save money. When tax season comes around, it could be especially helpful to freelancers or contractors who are paying back student loan debt on an irregular income.

So What Is It?

Each tax year, individuals can deduct the interest paid on student loans. If you file jointly with your spouse, you may also deduct the interest paid by your spouse. For example, if you paid $500 in student loan interest and made $50,000, then you are able to subtract $500 for a taxable income of $49,500.

As of the 2018 tax year, you are able to deduct up to $2,500 in student loan interest. For the record, the maximum deductible amount is still $2,500 for married couples filing jointly – not $5,000.

How About Eligibility Criteria?

There are several eligibility criteria to consider. To start, you need to have paid a minimum of $600 in interest within the tax year.

Your tax filing status must be single, head of household, qualifying widower, or married filing jointly. You are not eligible if you are married but filing separately.

Additionally, you also must be legally obligated to pay the loan back. For instance, you can’t deduct the interest paid voluntarily on a friend’s student loan account.

If you’re filing jointly with your spouse, then both you and your spouse must be affiliated with the loan.

Parents helping their children make payments on their student loans cannot file for the deduction. However, you are eligible if you claim your child as a dependent.

Are There Income Requirements?

Your income will impact your ability to claim the deduction. If you have a modified adjusted gross income that’s too high, you may not be eligible.

If your adjusted gross income is above $80,000 as a single filer, then you are not eligible. If you are married filing jointly with more than $165,000 in adjusted gross income, then you are not eligible as well.

There is one other confusing income requirement. Filers within certain adjusted gross income ranges are eligible for a partial student loan tax deduction. Single filers with adjusted gross income between $65,000 and $80,000 are eligible for only part of the deduction – not the full $2,500. Married joint filers with an adjusted gross income between $135,000 and $165,000 get the same deal.

If you want to check whether you are eligible for the deduction, the IRS offers a tool to check.

Is There a Tax Difference Between Federal & Private Student Loans?

The different types of student loans eligible for the interest tax deduction broadly include both federal student loans and private loans. Here’s a breakdown of which loans are eligible:

  • Subsidized and unsubsidized Federal Stafford Loans
  • Federal Grad PLUS Loans
  • Federal Parent PLUS Loans
  • Federal Consolidation Loans
  • State-provided student loans
  • Private student loans

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Note: at Keeper, we care about helping you save on taxes. That leads us to generalize tax advice which ultimately cannot be completely generalized. Everyone's situation is different. Please drop a note above or reach out via email if you have questions.