What is the student loan interest deduction?
Who is eligible for the deduction, how to make a claim, how to file and more.
If you’ve been paying off student loans, you have the ability to get a tax deduction on the interest you’ve paid on your loans. Anyone paying student loans may be able to deduct up to $2,500 of the interest paid in the past year on a qualified student loan. The student loan interest deduction is claimed as an adjustment to income.
Who is eligible for the deduction?
The deduction is available to anyone earning less than $80,000 (or $165,000 if you file a joint return). The deduction can reduce the amount of your taxable income by up to $2,500. The loan must have been for a student enrolled, at least half time, in a program leading to a degree, certificate, or other recognized educational credential. If you took out a loan from a relative or through an employer plan, you don’t qualify.
How do you claim a student loan interest deduction?
To find out if you can claim the student loan interest deduction you can use this IRS Tool. You'll need to know your filing statistics, income, adjusted gross income, and any expenses you've paid for education loans.
How do you file?
Any borrower who pays more than $600 in interest should receive a Form 1098-E — a student loan interest statement from the lender. On your 1040 form, you'll enter the amount of loan interest you've paid, up to $2,500.
Did the 2018 tax plan affect the student loan interest deduction?
Under the proposed plan, the tax deduction for student loan interest would be eliminated. That means millions of Americans would no longer have the ability to deduct up to $2,500 in student loan interest under the tax bill. Fortunately, changes to the student loan interest deduction were rejected in the final bill.1
The First Tech Student Loan team can help you develop a personalized plan to pay off your student loans based on your goals and financial situation. Contact First Tech today to learn more about your student loan options.