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With tax season right around the corner, it is necessary to know our income and expenses and how they affect our tax return. One of these expenses is the interest you pay on your student loan. Knowing how to declare these will put you ahead in the game for as long as you have to continue paying.
For tax return purposes, you can only declare the interest you paid on a qualified student loan in the tax year you are filing your return. Since you can present this deduction as an adjustment to your income, you do not need to itemize it.
You can only claim a deduction for your student loan interest if your filing status is not married filing separately, if your modified adjusted gross income (MAGI) is below the established limit, and if neither you nor your spouse (if filing tly) is claimed as dependents by another taxpayer.
The Student Loan Interest Deduction
Deducting your student loan interest will allow you to reduce your taxable income by up to $2,500 per year. However, this deduction only applies to loans for higher education expenses, including tuition, fees, and necessary supplements.
In addition, the IRS sets an income limit to receive the full $2,500 deduction. After this limit, the deduction begins to gradually fade away and ends completely for taxpayers with the highest incomes.
These are the income limits for the student loan interest deduction for 2025:
Single taxpayers (MAGI)
- Full deduction: $85,000 and below
- Partial deduction: More than $85,000 and less than $100,000
- No deduction: $100,000 and above
Married taxpayers (MAGI)
- Full deduction: $170,000 and below
- Partial deduction: More than $175,000 but less than $200,000
- No deduction: $200,000 and above
What student loans qualify?
In principle, only loans you took out for educational expenses at an eligible institution qualify. Federal loans such as Direct Loans, Plus Loans, and Perkins Loans, as well as private loans from banks or credit unions, generally qualify.
Personal loans, credit card debt, or home equity loans do not qualify, even if you used them to pay for your education. Loans from family, friends, or employer-sponsored educational assistance programs do not qualify either.
Being informed is the first step to filing your tax return in a timely manner. Taking this information into when preparing your return will save you many headaches in the short and long term.