Interest Tax Deductions for Student Loan Debt

In 2016, IRS tax law allows you to claim a student loan interest deduction of $2,500, as long as you and your student loans meet certain eligibility criteria.

Everyone is always looking for ways to reduce their tax liabilities, but many people have no idea that this significant tax deduction is widely available.

In fact, the $2,500 deduction can be utilized by holders of both Federal and Private student loan debt, as long as they meet the conditions outlined below.

Eligibility for the $2,500 Student Loan Tax Deduction

If you made interest payments on a student loan in 2014, then you might be able to claim a deduction of up to $2,500 on your tax return filed for 2015.

The best part about this program is that you can claim the deduction as an adjustment to your income, so you don’t even have to itemize your deductions in order to qualify for this program.

However, eligibility for this deduction is relatively limited, and to claim this tax break legally, you’ll need to meet all of the following conditions:

  • You paid interest on a qualifying student loan during the 2014 tax year
  • You were legally obligated to pay interest on the qualifying student loan (meaning that you were the person primarily responsible for paying off the debt – if you were paying off your friends loan, or even your child’s loan, this program might not be eligible to you)
  • You are not filing taxes as married, filing separately (any other filing status is eligible)
  • Your modified adjusted gross income is less than $70,000 (for single taxpayers) or less than $145,000 (for those married, filing jointly)
  • You are not being claimed as a dependent on anyone else’s tax return

What Counts as a “Qualifying” Student Loan?

Not all student loans are eligible to take advantage of this interest tax write off.

In fact, the IRS makes it quite clear that qualified student loans are loans that were taken out “solely to pay qualified higher education expenses”, as defined in their Publication 970, and Form 1040 Instructions.

To save you the trouble of having to look up those documents and check out their information, here’s the types of expenses that qualify:

  • Tuition costs
  • Room and board
  • Books
  • Supplies
  • Transportation
  • Miscellaneous expenses (that can be tied directly to the costs of higher education)

The good news is that virtually all student loans satisfy these conditions, unless you’ve been gaming the system and using your student loan money to pay for expenses that it’s not supposed to be spent on.

How Do I Actually Claim The Deduction?

First, you have to calculate how much of the $2,500 you can actually claim.

The rule is that you get to deduct the “lesser of $2,500 or the amount of interest you actually paid”.

What that means is, if you only paid $500 in interest, then you’ll only be able to deduct $500 from your return. However, if you paid $5,000 in interest, you’ll still only be able to claim that maximum cap of $2,500.

Once you know how much you’ve paid in interest, you can simply write that amount (or the max of $2,500), on your tax return in the field that allows you to make adjustments to your taxable income.

It’s that easy!

Other Tax Credits for Students

For those of you still attending school (or paying for someone else to attend school), we’ve got even better news!

This year offers a variety of significant opportunities to further reduce your costs by taking advantage of some other excellent tax deductions for students as well.

To get the details on all of the tax credits available to students this year, be sure to check out our recent blog post – 2015’s Best Tax Deductions for Students.

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Disclaimer: This post is NOT sponsored content as I don't accept any form of sponsored posts, advertorials, native advertising, influencer marketing or incentivized, paid or promoted content. However, this post may contain affiliate links. If you purchase a product or service linked to from this post, I will receive some form of compensation.


Tim's experience struggling with crushing student loan debt led him to create the website Forget Student Loan Debt, where he offers advice on paying off student loans as quickly, and cheaply, as possible. His new website Forget Tax Debt, offers similar advice to people with back tax problems.

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