Student Loan Interest Deduction
A significant amount of interest paid on student loans is tax deductible. Education-loan borrowers may be able to deduct up to $2,500 in interest paid yearly on loans used to pay for qualified educational expenses.
To qualify, proceeds of the loan must have been used for qualified higher education expenses, including tuition, fees, room, board, supplies, and other related expenses by the taxpayer, the taxpayer's spouse, or the taxpayer's dependent.
The maximum allowable deduction is gradually reduced for single taxpayers whose incomes exceed $60,000 ($120,000 for married taxpayers filing jointly), and is not available for those with incomes over $75,000 ($150,000 if filing jointly), or for married taxpayers filing separately.
If you paid $600 or more in interest on a qualified student loan during the year, you will receive a Form 1098-E, Student Loan Interest Statement, from the financial institution, from a governmental unit (or any of its subsidiary agencies), from educational institutions, or any other person to whom you had paid student loan interest of $600 or more in the course of their trade or business.
To claim this deduction, taxpayers must file federal tax form 1040 or 1040A; however, itemizing deductions is not a requirement.
Visit the IRS Web site for additional information.