Are student loans tax deductible? Is student loan interest deductible?

Short answer: The principal on student loans is not deductible, but the interest you pay on a qualified student loan may be deductible — up to $2,500 per year — subject to income limits and other rules.

Below I’ll walk you through what is deductible, who can claim it, the income phase-outs, how to claim the deduction, special cases to watch for, and simple examples so you can decide whether it matters for your tax return.

1) What exactly is deductible?

Only the interest portion of your student loan payments can be deducted as the student loan interest deduction. You cannot deduct payments that go to principal, nor are the loans themselves deductible. The deduction is an “above-the-line” adjustment to income — meaning you can take it whether or not you itemize.

The maximum federal deduction is the lesser of:

• $2,500, or

• the actual interest you paid during the tax year.

That cap has been the rule for several years; the amount you can actually claim depends on your income (see section 3).

2) Who can claim the student loan interest deduction?

You can typically claim the deduction if all of the following are true:

• You paid interest on a qualified student loan during the year (see next subsection).

• You (and if filing jointly, your spouse) are not claimed as a dependent on someone else’s return.

• Your filing status is not Married Filing Separately.

• Your modified adjusted gross income (MAGI) falls below the applicable phase-out threshold for the tax year.

What’s a “qualified student loan”?

A qualified student loan is money you borrowed solely to pay qualified higher education expenses for you, your spouse, or a dependent. Qualified loans include federal loans (Direct, FFEL, Perkins) and many private student loans — but not home-equity loans or other consumer debt used for non-educational purposes. The loan must have been used for eligible expenses (tuition, fees, room and board if required, books, etc.) for an eligible student (generally enrolled at least half-time in a degree or certificate program).

If your employer paid some or all of your student loan interest under an educational assistance program, special rules apply and you generally can’t double-dip — see Publication 970 for details.

3) Income limits and the phaseout

The amount you can claim depends on your MAGI (modified adjusted gross income). Because those MAGI thresholds are indexed, they can change year by year. Two authoritative and helpful references:

• IRS Publication 970 / IRS Topic 456 (authoritative for tax year 2024 filed in 2025) shows the 2024 phaseout range: single/head of household/qualifying widow(er) — phaseout between $80,000 and $95,000; married filing jointly — phaseout between $165,000 and $195,000. If your MAGI equals or exceeds the top of the band, you cannot claim the deduction for that year.

• Many tax prep resources (H&R Block, Fidelity, TaxSlayer, etc.) report the inflation-adjusted 2025 phaseout numbers: single phaseout $85,000–$100,000, married filing jointly $170,000–$200,000, with full disallowance at the top of those ranges. If you’re preparing a return for tax year 2025 these are the figures most preparers use; always confirm with the IRS or your tax software for the tax year you’re filing.

Bottom line on income: check the MAGI limits for the year you’re filing. If your MAGI is below the lower bound, you can claim up to $2,500. If you’re inside the band, your deduction is reduced by a formula in Publication 970. If you’re at or above the upper bound, you can’t claim it.

4) How to calculate and claim the deduction

1. Get Form 1098-E: If you paid $600 or more in interest to a single lender, that lender generally sends you Form 1098-E showing interest paid. Even if you don’t get a 1098-E (because you paid under $600), you can still deduct what you actually paid — but keep records.

2. Use the worksheet: Publication 970 and the instructions to Form 1040 include a worksheet that walks through the phaseout calculation when your MAGI falls in the phaseout range. It’s straightforward: compute MAGI, compare to phaseout band, apply the percentage reduction, and the worksheet gives your allowable deduction.

3. Enter the deduction on Form 1040: The student loan interest deduction is an adjustment to income reported on Schedule 1 (Form 1040) — generally on the line for "student loan interest deduction" (Schedule 1, Line 21 on recent forms). After Schedule 1, the total adjustments flow to Form 1040 and reduce your AGI. Because it’s “above-the-line,” you don’t need to itemize to benefit.

5) Examples (quick)

• Low-income single filer: You paid $1,800 interest in 2024, MAGI = $60,000. You can deduct the full $1,800 (limit is $2,500).

• Mid-income married couple: You and your spouse paid $3,200 interest in 2025, MAGI = $180,000. For 2025 the $3,200 is capped at $2,500; because your MAGI is inside the phaseout band ($170k–$200k for 2025), your allowable deduction will be reduced according to the IRS worksheet — you won’t automatically get the full $2,500. Use Publication 970 worksheet or your tax software to compute the precise number.

• High-income filer: You paid $2,000 interest, MAGI = $210,000 (single). If the top-of-band for your tax year is $100,000 (or $95k for 2024), you’re over the limit and get no deduction.

6) Special situations & things to watch for

• You can’t claim if someone else claims you as a dependent. If your parents claim you, they can’t claim your loan interest unless they’re legally obligated on the loan.

• Married filing separately: You generally cannot take the deduction if you file MFS.

• Refinanced loans: If you refinance a qualified student loan with a private lender, the new loan can still be a qualified loan if it was used to pay qualified education expenses. Keep records showing the original loan purpose.

• Employer payments: Employer-paid student loan interest can be tax-free under some programs (temporary rules applied under COVID legislation) but there are anti-double-benefit rules. If your employer excluded interest payments under an educational assistance plan, you may not claim that interest as a deduction. Publication 970 explains the “no double benefit” rules.

• Loan forgiveness: Forgiveness programs and tax-free discharge rules are a separate (and sometimes changing) topic. The federal treatment of student loan forgiveness changed in recent years; forgiven amounts may be tax-free federally (check current law), but state tax treatment varies. Forgiven amounts are not the same as interest deduction — you cannot deduct forgiven principal or interest that’s not actually paid by you.

• State taxes: State treatment of student loan interest varies. Some states follow the federal deduction; others have their own rules (some allow a state deduction or credit, some don’t). If you have state income tax, check your state’s department of revenue guidance.

7) Recordkeeping checklist

• Form 1098-E (or lender statements showing interest paid).

• Loan documents showing the loan was used for qualified education expenses (especially for refinances).

• Payment records (bank statements, online loan account history) proving interest paid.

• Copies of the worksheet and tax forms you used to compute the deduction.

8) Practical advice

• If you’re near the phaseout boundaries, run the numbers (tax software or the Publication 970 worksheet). Small changes in MAGI can make a deduction vanish or reappear.

• Don’t overestimate the benefit. The deduction reduces taxable income (not tax owed), so the actual tax savings equals the deduction times your marginal tax rate. For many filers the benefit is modest; still useful because it’s available even if you take the standard deduction.

• Check each tax year’s rules. Inflation adjustments can change the MAGI bands. Use the current year IRS Publication 970 and the Schedule 1 instructions when you file.

• If you have complicated questions (AMT, foreign income, employer payments, or forgiveness issues), consider a tax pro — the student loan interest rules interact with other parts of the tax code.

9) Quick reference (authoritative sources)

• IRS Topic No. 456 — Student Loan Interest Deduction.

• IRS Publication 970 — Tax Benefits for Education (walks through qualification, worksheets, examples).

• Schedule 1 (Form 1040) and its instructions — where the deduction is reported (adjustment to income).

Final takeaway

Student loan principal is not deductible. Student loan interest can be, up to $2,500, but whether you can claim it depends on the loan type, who’s responsible for the loan, your filing status, and — importantly — your MAGI for the tax year you’re filing. Use Publication 970 and Schedule 1 instructions (or tax software) to calculate the actual amount, and check current-year MAGI thresholds because they can change.