Tax season opened in January 2025 to file returns for the 2024 financial year and taxpayers who have student loans need to know how to deduct the interest correctly. It’s important to keep in mind that only loans to study at eligible institutions are deductible, according to the official IRS website, and you can find more information on this below.
Student loan interest can be claimed back on your tax return
The US Internal Revenue Service allows taxpayers to claim back for interest paid on student loans. However, certain criteria apply and it’s vital to understand what you may claim back for in terms of student loan interest and how to go about it during tax filing season.
The IRS has reminded taxpaying student borrowers that only interest on loans that were used to cover study costs at eligible institutions are declarable and deductible. The deduction is presented as an income adjustment, so it does not have to be itemized on your return.
Here are the important eligibility conditions to be aware of:
- To be eligible, your tax filing status cannot be “married filing separately”, meaning that if you are married, you and your spouse have to be filing jointly.
- The IRS has set a modified adjusted gross income (MAGI) scale and your income must be below a certain threshold to qualify for the tax deduction. Those with incomes above the MAGI will either qualify for a reduced amount or not qualify at all, depending on how much above the threshold you earn.
- Anyone claiming deductions on their tax liability for interest paid on student loans may not be listed as a dependent on anyone else’s tax return. This also applies to spouses for those who file jointly.
How much can you deduct from your taxes for interest on student debt?
Taxpayers paying the interest on student loans can deduct up to $2,500 from their taxable income per year. However, this only applies to debt that covered expenses related to higher education, such as tuition and related expenditures.
MAGI income limits
These are the annual income limits for tax filers in 2025 according to the MAGI:
Single taxpayers:
- Student debt holders who earn $80,000 or less per year will qualify for the full deduction.
- Those who earn between $80,000 and $95,000 will be granted a partial deduction.
- Anyone earning $95,000 or above does not qualify for the tax deduction.
Married tax filers:
- Married couples who file jointly and earn a combined $165,000 or less per year are eligible for the full deduction.
- To qualify for the partial deduction, the income bracket for couples is between $165,000 and $195,000.
- Couples who file jointly and earn $195,000 or above do not qualify for the student loan interest deduction at all.
Another way to decrease your expenses related to student debt is to pursue student loan forgiveness programs.
Which student loans qualify for the tax deduction?
As mentioned above, not all loans qualify for tax deductions, as set out by the IRS. Only debt you took out to cover educational expenses at an eligible institution qualifies. The types of loans that generally qualify are federal loans such as Perkins Loans, Direct Loans, or Plus Loans, or private loans from credit unions or banks.
You may have taken out personal or home equity loans or gotten yourself into credit card debt to pay for your education, but these forms of debt do not qualify. Neither do loans from family or friends or employer-sponsored educational assistance programs.
The first step to filing a complete, timely, and correct tax return is to be well-informed. There are various forms of assistance and support available to tax filers, and you can start by visiting the official IRS website. You can also find information about different kinds of rebates, credits, and deductions available, such as the Child Tax Credit (CTC).
Read the whole thing?
Get the week's signal, not the noise
Our sharpest reporting on energy, climate and nature — free, once a week.
