A tax deduction is an amount you subtract from your income when filing taxes. It allows you to reduce your taxable income — and with it, how much you owe in taxes. If you're a student, your student loan interest payments may be deductible, so it's a good idea to check if you qualify for this valuable tax break.
CNBC Select explains how student loan interest deduction works, who's eligible and how you can claim it when filing your taxes.
Guide to student loan interest deduction
Is student loan interest deductible?
Qualified borrowers can deduct the interest portion of their student loan payments. According to the IRS, you can claim this deduction as an adjustment to income, meaning you don't need to itemize your deductions to take advantage of it. This tax break can help you write off as much as $2,500 of your taxable income.
Who qualifies for the student loan interest deduction?
You need to meet the following qualifications to be eligible this year:
- You're enrolled at least half-time;
- You paid interest on a qualified student loan in 2023;
- You're legally obligated to pay interest on that student loan;
- Your filing status isn't married filing separately;
- Your modified adjusted gross income (MAGI) is less than $90,000 if you're filing as single, head of household, or $185,000 if you're married and filing a joint return;
- No one claims you or your spouse, if filing jointly, as dependents.
How do I know if my student loan qualifies for the tax deduction?
The deduction applies to all student loans — not just federal loans. Your loan is eligible if you used it solely for higher education expenses that were:
- For you, your spouse or dependent;
- For education provided during an academic period (such as a semester, trimester, quarter or other period of study);
- Paid or incurred within a reasonable period before or after you took out the loan.
As the IRS explains, a period of time is considered "reasonable" when the loan expenses relate to a specific academic period, and the loan proceeds are disbursed "within a period that begins 90 days before the start of that academic period and ends 90 days after the end of that academic period".
The amount of student loan interest you can deduct decreases as your income rises. For example, as a single filer, you can only claim the full interest amount (up to $2,500) this year if your MAGI for 2023 is $75,000 or less. If it's more, the deduction amount will be reduced. You can use page 35 on this information sheet to calculate the phaseout.
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How to deduct student loan interest
If you paid at least $600 in interest on your student loan, your servicer should send you IRS Form 1098-E, which will contain the amount of student loan interest your lender has received from you. If you've paid less or haven't received the form, you can still get in touch with your servicer and ask for the specific amount of interest you paid in 2023.
With that information, you can deduct your student loan interest when filing your taxes. If you're using tax software to file yourself, you may be able to file for free. For instance, TurboTax lists student loan interest deduction as one of the covered situations in TurboTax Free Edition (roughly 37% of tax filers qualify for this edition according to TurboTax). A leader in the tax software market, TurboTax provides a wide range of features to make filing easy. You can also opt to pay for live assistance from a tax expert.
TurboTax
Cost
Costs may vary depending on the plan selected - click "Learn More" for details
Free version
TurboTax Free Edition. ~37% of taxpayers qualify. Form 1040 + limited credits only.
Mobile app
Yes
Live support
Available with some pricing and filing options
Click here for TurboTax offer details and disclosures. Terms apply.
H&R Block also includes 1098-E as one of the forms included in the Free Online tier you can use for DIY filing. If you'd rather have some tax assistance, you can upgrade to one of the paid plans.
H&R Block
Cost
Costs may vary depending on the plan selected (Free Online, Deluxe, Premium, or Self-Employed) - click "Learn More" for details
Free version
Yes (for simple returns only)
Mobile app
Yes
Live support
Available with some pricing and filing options
Terms apply.
Other tax breaks for students
If you're currently working toward a degree, you might qualify for educational credits, such as:
- American Opportunity Tax Credit of up to $2,500 per year for qualified education expenses paid for the first four years of school as you're working toward a degree or other credential.
- Lifetime Learning Credit of up to $2,000 per year for qualified tuition and other school expenses to help you pay for undergraduate, graduate and professional degree courses.
You'll need a Form 1098-T from your school to claim either of these credits. Make sure to carefully read the eligibility requirements posted by the IRS to make sure you qualify.
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Bottom line
If you're paying off your student loans, you may qualify for a student loan interest deduction, which can reduce your taxable income and make up for some of the educational costs. To maximize your tax breaks, look into working with a tax professional — certain tax software companies make tax assistance simple and affordable.
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