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Can You Deduct Student Loans From Your Federal Income Tax Return?

Can You Deduct Student Loans From Your Federal Income Tax Return?

The student loan interest is another contemplation that requires logic and skills to get what you want from the federal income tax. Remember that it is a loan, but you can still make $2,500 on the interest, which you can use to pay for higher education. However, there are hurdles like filing status, income level, etc. 

  • In 2022, the loan interest deduction was a Modified Adjusted Gross Income (MAGI) of $70,000 to $85,000 (single, head of household, and widow (er)); for married filing jointly, the MAGI starts at $145,000 to $175,000.

  • In 2023, a loan interest MAGI of $75,000 to $90,000 for Single, HOH, and widow (er); for married filing jointly, the MAGI starts at $155,000 to $185,000.  

Are You Eligible? 

The IRS allows taxpayers to deduct interest on student loans paid as single, HOH, or widow (er) or on payments by you or your spouse using the joint filing return. However, 

  • Married couples or those claiming a dependent on another tax return do not qualify for this deduction. 

  • Remember that you have to pay back the loan and sign by yourself or you and your spouse if you use the joint status. 

  • The deduction requirement rejects taxpayers who assist their child in taking the loan.

Student Loans That Qualify

You, your spouse, or your dependent can only benefit from qualified student loans. In essence, if you get a loan from an employer, family member, private, or friend, it doesn’t count. The loan is to help parents with student expenses. You will not qualify for the deduction if you took $9,000 and only used $8,000 for student expenses and used the rest for other non-related purposes.

Here are examples of qualified education expenses.

  • Tuition

  • Room and board

  • Books, supplies, and equipment

  • Transportation

  • Fees

How Much Is the Deduction? 

The IRS maximum deduction for federal tax on student interest loans is $2,500 or less based on income level and other factors. Only taxpayers with MAGI in a particular tax bracket can benefit, and those with high MAGI do not qualify. 

Student loan interest deduction form

The student loan interest deduction form is sent by mail or email. The IRS sends a form 1098-E to taxpayers who paid up to $600 in interest for the 2022 tax year. However, the scheme was suspended in 2022 since the federal interest rate was 0%. But you can still deduct your interest if you qualify.

However, if the IRS does not contact you with a student loan interest deduction form, visit the student loan provider office or the lending company. These places may offer the form and details on how much you can deduct with an online account. 

How To Calculate Your Deduction

Your MAGI is a vital part of estimating your deduction. Calculate the adjusted gross income before taking other deductions. You can’t deduct a student interest loan before finalizing your MAGI because that will be claiming it twice. In addition, you cannot remove some deductions, like:

  • The foreign-earned income exclusion

  • The foreign housing exclusion

  • The foreign housing deduction

However, you don’t need all the student loan statements of the year to fill out this form. You can get Form 1098-E from the loan provider before the tax year. You’ll find the interest in Box 1 of the document. 

This deduction is a way to get help in saving up to $2,500 from paying what you owe. The IRS permits taxpayers to only take this amount out of their federal taxes if they qualify. Check the requirement and consider your options before applying for the deduction.



Dennis Jao
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