If you're a student who is paying back student loan debt, you may be wondering if you can save on your income tax bill by deducting your loan payments. The fact is, your student loan payments themselves are not tax deductible, but the interest you pay on them could be.
Thanks to the student loan interest deduction, you may be able to deduct up to $2,500 of the interest you paid on your student loans every year. If the amount of interest shown on that form is less than $2,500, you can deduct only the actual amount of interest that you paid.1
Who qualifies for the deduction?
To qualify for the tax deduction, the student loan on which you're paying interest must have been taken out by you. In addition, you must be or have been enrolled at least half-time in a degree, certificate, or other type of educational credential program. The school also must be an eligible educational institution, such as a college, university, or vocational school that meets student aid program guidelines.
You must also meet certain income limits based on your modified adjusted gross income (MAGI). For updated information as to this year's current income limit, visit the IRS website.
How to claim your deduction
You claim this deduction as an adjustment to your income, meaning that you don't need to itemize your deductions when you file your taxes. Keep in mind that if you're married, you can't file separately and receive the tax deductions. To be eligible, young married couples must file jointly to claim the tax break.