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Can I Deduct My Student Loan Interest?

As of January 1, 1998, people who have taken loans to pay the cost of tuition for themselves, their spouse, or their dependents may deduct at least part of the interest paid on these loans on their tax return. However, the the taxpayer wanting to claim the deduction must pay at least $600 in interest for the year that they are claiming the deduction.

How Much Can I Deduct?

An annual tax deduction of up to $2,500 is generally available annually for interest paid on student loans. You should always make sure, though, to check the current laws governing student loan repayment tax deductions to see if the deductible amount has changed for the year that you are filing your tax return.

Are There Any Limits to These Tax Deductions?

Like any other tax deduction, there are limits on student loan tax deductions that may prevent you from being able to claim the deduction for yourself. These limits include: 

  • If someone claims you as a dependent
  • If your modified adjusted gross income is $75,000 or more
  • If you file a separate tax return but are married
  • If the student loan interest is paid to a person related to you, such as a parent or a sibling
  • If the amount was deducted for tax purposes under any other tax code provision

What Is a Tax-Qualified Student Loan?

A tax-qualified student loan is defined as indebtedness sustained to pay for the qualified higher education expenses of the taxpayer, a spouse, or any other dependent in attending a college, university, post-secondary educational institution, certain trade schools, or other establishments eligible to join in Department of Education student financial assistance programs.

What Are Qualified Educational Expenses?

Qualified educational expenses are those that are entitled to a tax deduction. They include: 

  • Tuition
  • School fees
  • Dormitory fees
  • Textbooks
  • Educational equipment
  • Transportation costs

Does a Scholarship Affect My Tax Deductions?

Certain expenses are reduced by additional financial assistance, such as a scholarship. Other assistance that expenses may be reduced by include: 

  • Veteran’s educational assistance
  • Tax free gifts and inheritances
  • Tax free employer educational assistance
  • Tax free IRA educational distributions
  • Interest from United States Savings Bonds used for educational expenses

The reduced amount of expenses due to additional financial expenses may affect how much you take out in student loans, which will subsequently affect how much you will be able to claim as a tax deduction.

Do I Need a Lawyer to Help Me with My Income Tax Problem?

Tax law is a very complicated and frustrating subject. To make matters worse, tax law changes every year. A tax attorney can help you understand current tax law and how it affects your income tax problem. If you have questions regarding the deductibility of your expenses, or if you need to go to tax court, an attorney can represent you and help minimize your income tax bill.

Photo of page author Kristen Johnson

, LegalMatch Legal Writer

Last Modified: 10-28-2014 03:40 PM PDT

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