Student Loan Interest Deduction

Why This Matters

If you’re paying off student loans, you may be able to deduct up to $2,500 of the interest you paid each year as an “above-the-line” adjustment to income — meaning you don’t have to itemize to claim it. For recent graduates and anyone making student loan payments, this is a straightforward way to reduce your tax bill.

How the Deduction Works

The student loan interest deduction allows you to deduct up to $2,500 per year of interest paid on qualified student loans, regardless of whether you take the standard deduction or itemize. The deduction is per tax return, not per loan — total interest paid across all your student loans counts toward the $2,500 cap.

The deduction applies to both federal and private student loans, as long as the loan was taken out solely to pay for qualified higher education expenses (tuition, fees, room and board, books, supplies) for you, your spouse, or your dependents.

Who Can Claim It

To claim the deduction:

• You must be legally obligated to pay the loan and actually paying the interest yourself. The loan must be in your name. If your parents took out the loan or are making payments, they claim the deduction — not you.
• You cannot be claimed as a dependent on someone else’s tax return.
• If married, you must file jointly. Married filing separately disqualifies you entirely.

Income Phase-Outs

The deduction phases out at higher incomes based on your modified adjusted gross income (MAGI). For 2026, the phase-out ranges are:

• Single or Head of Household: The deduction begins phasing out at $85,000 of MAGI and is fully eliminated at $100,000.
• Married Filing Jointly: The phase-out range is $175,000 to $205,000.

Within the phase-out range, the deduction is reduced proportionally — the closer your MAGI is to the upper limit, the smaller your allowed deduction. Above the upper threshold, the deduction is completely unavailable, regardless of how much interest you paid.

These thresholds adjust annually with inflation, so check current IRS limits before assuming a deduction is available.

What Counts as Interest

Your loan servicer will typically send you a Form 1098-E by the end of January if you paid more than $600 in interest during the year. If you paid less, you may not receive the form, but you can still claim the deduction by calculating the amount from your payment records.

The deduction covers actual interest paid, plus certain loan origination fees and capitalized interest (unpaid interest that gets added to the loan principal), which are amortized over the life of the loan.

During School vs. After Graduation

The deduction applies regardless of whether you’re currently in school or have already graduated. As long as you’re paying interest on a qualified student loan, the deduction is available — relevant for graduate students paying interest on undergraduate loans, and for recent graduates in their early-career years.

Stacking with Other Education Benefits

This deduction is separate from the education tax credits (AOTC and LLC) that may have applied while you were in school — they cover different costs (interest paid on loans vs. tuition paid for enrollment) and can both apply in the same year if circumstances allow. Funding from a 529 plan doesn’t affect this deduction either; the student loan interest deduction is purely about interest paid on outstanding debt.

The Takeaway

The student loan interest deduction lets you deduct up to $2,500 per year of interest paid on qualified student loans as an above-the-line adjustment to income. The deduction is available for federal or private loans, but you must be legally obligated to pay and actually paying the interest yourself. For 2026, the deduction phases out between $85,000 and $100,000 of MAGI for single filers and between $175,000 and $205,000 for married filing jointly. Married filing separately disqualifies you entirely. Form 1098-E from your loan servicer makes claiming the deduction straightforward.