If you’re one of the millions of Americans repaying student loans, there’s a silver lining come tax time: you may be eligible to deduct up to $2,500 in student loan interest, even if you don’t itemize your deductions.
At Basso & Guida, we work with individuals across Long Island and beyond to help them take advantage of every tax break available—including the often-overlooked student loan interest deduction. Here’s what you need to know about how this deduction works and how it can help reduce your taxable income.
What Is the Student Loan Interest Deduction?
The student loan interest deduction allows you to deduct the interest you paid on qualified student loans during the tax year. The deduction is available whether you itemize your deductions or take the standard deduction, making it one of the few above-the-line deductions available to many taxpayers.
You can deduct:
- Up to $2,500 of interest paid on qualified student loans
- Even if you only paid a small amount, it’s worth claiming—it could reduce your adjusted gross income (AGI) and your tax liability
Do You Qualify?
To be eligible for the deduction, you must meet the following criteria:
✅ You paid interest on a qualified student loan during the tax year
✅ You are legally obligated to repay the loan
✅ Your filing status is not “Married Filing Separately”
✅ Your Modified Adjusted Gross Income (MAGI) is within IRS limits
✅ You and your spouse (if filing jointly) are not claimed as dependents on someone else’s return
Income Limits to Know
Like many tax deductions, the student loan interest deduction is subject to income phaseouts:
- For the 2024 tax year, the deduction begins to phase out at:
- $80,000 MAGI for single filers
- $165,000 MAGI for married couples filing jointly
- The deduction is fully phased out at:
- $95,000 MAGI for single filers
- $195,000 MAGI for joint filers
Even if you’re close to the phaseout threshold, it’s worth calculating what portion of the deduction you may still be eligible for.
What Counts as a Qualified Student Loan?
To be considered “qualified,” the loan must have been:
- Taken out solely to pay qualified education expenses
- For you, your spouse, or your dependent
- Used for qualified education expenses like tuition, fees, room and board, and supplies
- For an eligible student enrolled at least half-time in a degree or certificate program
Loans from family members or employer-sponsored plans typically don’t qualify for this deduction.
How to Claim the Deduction
Most loan servicers will send you a Form 1098-E if you paid more than $600 in interest during the year. However, even if you didn’t receive the form, you can still claim the deduction if you paid interest.
To claim the deduction:
- Report the amount on Schedule 1 (Form 1040), Line 21
- Make sure you include any interest paid voluntarily, not just the minimum payment
Why It Matters (Even If It’s a Small Amount)
It may seem like a small deduction, but every bit counts—especially if you’re working to lower your AGI for other tax benefits, like the Earned Income Tax Credit or the Child Tax Credit. Plus, reducing your AGI can help you qualify for other deductions and credits that have income limits.
Let Basso & Guida Help You Maximize Your Return
Student loan interest is just one of the many opportunities to reduce your tax bill—and it’s one that far too many people miss. At Basso & Guida, we make sure nothing slips through the cracks. We’ll review your return carefully and look for every available deduction to help you keep more of your hard-earned money.
