What are the limits for deducting interest paid on a student loan?
The maximum deductible interest on a qualified student loan is $2,500 per
return. If you are a taxpayer whose return status is married filing jointly,
you are allowed to deduct the full $2,500 only when your modified adjusted
gross income (MAGI) is $100,000 or less. If your MAGI is more than $105,000,
but less than $135,000, the amount of your student loan interest deduction
is gradually reduced. The instructions for Form 1040 (PDF) show you how to compute the deduction. If your MAGI is $135,000
or more, you are not able to take any deduction.
For those whose filing status is single, head of household, or qualifying
widow(er), the full $2,500 deduction is allowed for MAGI levels equal to or
below $50,000. For MAGI between $50,000 and $65,000, the deduction amount
is gradually reduced. The Form 1040 Instructions. show
you how to compute the deduction. If your MAGI amount is $65,000 or more,
there is no deduction.
There is no deduction if you file as married filing separately, if you
are claimed as a dependent, or if the loan is from a related party or a qualified
employer plan. For more information, refer to Publication 970, Tax
Benefits for Education chapter 4; Tax Topic 505, Interest Expense ;
and Tax Topic 513, Educational Expenses .
Last year, my parents took out a student loan for me in their name
and I also took out a student loan. My parents received Form 1098-E for their
loan and I also received Form 1098-E for my loan. Can we both claim the interest
from the loans on our tax returns? Last year, I was not their dependent.
In order for a taxpayer to claim a deduction for student loan interest,
the loan must be incurred for the taxpayer, the taxpayer's spouse, or a person
who was the taxpayer's dependent when the taxpayer took out the loan. Since
you were not your parents' dependent when they took out the student loan,
the interest they paid on the loan does not qualify for deduction. However,
the student loan interest payments you made on the student loan you took out
on your behalf are eligible for deduction, provided all the other requirements
are met. For more information, refer to Publication 970, Tax Benefits
for Education chapter 4; Tax Topic 505, Interest Expense;
and Tax Topic 513, Educational Expenses.
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