The student loan interest deduction

If you paid interest on a student loan during the year, this page shows how that interest may lower your taxable income and where to find the figure. The rules turn on whose loan it is and who is legally responsible for repaying it.

What the deduction does

The deduction lowers your taxable income by the interest you paid, up to a cap set in law. It is taken as an adjustment to income, so you can claim it without itemizing. The cap and the income range where it phases out are published by the IRS.

A deduction reduces the income your tax is figured on, which is different from a credit that reduces the tax itself. The effect is often modest, but claiming it costs nothing when you meet the rules.

Which loans and payments count

The loan must have been taken out only to pay education costs for you, your spouse, or someone who was your dependent, while that person was enrolled at least half-time in a program that leads to a degree or credential. Federal Direct Loans and most private student loans fit this description. A loan from a relative, or from an employer plan, does not count.

Interest you pay by choice, such as during school or a grace period, counts in the year you pay it. A consolidation or refinance loan counts when it was used only to pay off qualifying student loans.

Before you claim it

• Form 1098-E or a year-end statement from each servicer
• Confirmation that the loan is in your name
• Whether anyone can claim you as a dependent
• Your filing status for the year

Who can take it

You must be the person legally obligated to repay the loan, and the deduction is closed to anyone whom someone else can claim as a dependent. People using the married filing separately status cannot take it either. A parent who borrowed a Parent PLUS loan is the obligated borrower, so the parent is the one who may deduct its interest.

If a parent or someone else pays your loan for you, the IRS treats that as money given to you and then paid by you. In that case you may deduct the interest yourself, as long as no one can claim you as a dependent.

Finding your number

Your loan servicer sends Form 1098-E when the interest you paid for the year passes a threshold the IRS sets. If you paid less and got no form, your servicer's online account or year-end statement still shows the interest, and it can still be deducted. Anyone with several servicers should add up each one.

Federal loan details are also visible in your account at studentaid.gov, which lists every servicer you have. A VITA volunteer can enter the deduction on your return at no cost.