Interest you pay on a Parent PLUS loan is tax deductible under the federal student loan interest deduction, worth up to $2,500 a year.1Internal Revenue Service. Topic No. 456, Student Loan Interest Deduction It’s an adjustment to income, so you can take it whether you itemize or claim the standard deduction. Two conditions matter most: you have to be the parent who borrowed the loan, and your income has to fall below the phase-out threshold for your filing status.
Who Can Claim It
Only the person legally obligated to repay a qualified education loan can deduct the interest. A Parent PLUS loan is in the parent’s name, so the parent is the only one who can claim the deduction.2Office of the Law Revision Counsel. 26 USC 221 – Interest on Education Loans The student cannot, even if the student is the one sending payments to the servicer. In that case the IRS treats the money as a gift from the student to the parent, and the parent is considered to have paid the interest.3Internal Revenue Service. Publication 970 (2025), Tax Benefits for Education
To qualify, all of the following must be true:
- The student was your dependent at the time the loan was taken out.
- The loan paid for qualified expenses such as tuition, fees, room and board, books, supplies, equipment, or transportation.
- The student was enrolled at least half-time in a program leading to a degree or recognized credential.
- No one else claims you as a dependent.
- You do not file as married filing separately.
The dependency and enrollment tests apply as of when the loan was originated, not the year you claim the deduction.2Office of the Law Revision Counsel. 26 USC 221 – Interest on Education Loans
Income Limits
The $2,500 ceiling is a per-return cap across all your qualified education loans combined, not per loan or per child.1Internal Revenue Service. Topic No. 456, Student Loan Interest Deduction How much of it you actually get depends on your Modified Adjusted Gross Income (MAGI), which for most parents is just adjusted gross income with a few add-backs like foreign earned income exclusions.3Internal Revenue Service. Publication 970 (2025), Tax Benefits for Education
For the 2026 tax year:4Internal Revenue Service. Revenue Procedure 2025-32
- Single, head of household, or qualifying surviving spouse: the deduction phases out between $85,000 and $100,000 of MAGI.
- Married filing jointly: it phases out between $175,000 and $205,000.
- Married filing separately: no deduction, at any income.
Inside the phase-out band, the deduction shrinks proportionally. A single filer with MAGI of $92,500 sits halfway through the range and can deduct roughly half of the eligible interest, capped at about $1,250 instead of the full $2,500.3Internal Revenue Service. Publication 970 (2025), Tax Benefits for Education
What Counts as Interest
The Parent PLUS origination fee, currently 4.228% of the loan amount for loans disbursed before October 1, 2026, counts as deductible interest. The IRS treats it as a charge for the use of money, and you deduct it over the life of the loan rather than all in the year of disbursement.3Internal Revenue Service. Publication 970 (2025), Tax Benefits for Education For loans made on or after September 1, 2004, your servicer should already include the origination-fee portion in Box 1 of Form 1098-E.5Internal Revenue Service. Instructions for Forms 1098-E and 1098-T (2025) If it isn’t there, you can allocate it yourself using any reasonable method spread over the loan’s term.
Capitalized interest also qualifies. Parent PLUS loans have no automatic grace period, so interest starts accruing at disbursement. If you defer payments while your child is in school, that interest gets added to the principal, and you can deduct it as you make payments on the loan once repayment begins. You cannot deduct it in a year when you made no payments at all.3Internal Revenue Service. Publication 970 (2025), Tax Benefits for Education
Refinancing or Transferring the Loan
Refinancing doesn’t cost you the deduction. If you consolidate through the federal Direct Consolidation program or refinance with a private lender, the new loan still counts as a qualified education loan as long as the proceeds were used only to pay off the original loan.7Office of the Law Revision Counsel. 26 USC 221 – Interest on Education Loans
Parent PLUS loans cannot be transferred to the student through any federal program. The only route to move the debt into the student’s name is private refinancing. Once the student refinances into their own name, the student becomes the legally obligated borrower and can claim the deduction going forward, provided they meet the other tests (including the income limits and not being claimed as someone else’s dependent). The parent loses the deduction at that point because the parent is no longer the borrower.
How to Claim It
Your servicer must send you Form 1098-E if you paid $600 or more in interest during the calendar year.6Internal Revenue Service. About Form 1098-E, Student Loan Interest Statement Box 1 reports total qualifying interest, including origination-fee interest and eligible capitalized interest.5Internal Revenue Service. Instructions for Forms 1098-E and 1098-T (2025) If you paid less than $600 the form may not arrive automatically; log in to your servicer’s portal or ask for a year-end interest statement.
Report the deduction on Schedule 1 (Form 1040), on the student loan interest line under “Adjustments to Income.”3Internal Revenue Service. Publication 970 (2025), Tax Benefits for Education The amount reduces your adjusted gross income directly, which can also improve your eligibility for other tax benefits tied to income thresholds. Claiming interest you weren’t entitled to, such as when your income sits above the phase-out or you’re filing separately, can trigger a 20% accuracy-related penalty on the underpayment.8Office of the Law Revision Counsel. 26 USC 6662 – Imposition of Accuracy-Related Penalty on Underpayments Check your MAGI against the phase-out and verify the Box 1 figure before filing.
Using It Alongside an Education Credit
You can take the student loan interest deduction and an education credit (the American Opportunity Tax Credit or the Lifetime Learning Credit) for the same student in the same year, but you cannot use the same dollar of expense twice.9Internal Revenue Service. No Double Education Benefits Allowed For Parent PLUS borrowers this rarely creates a conflict: the interest deduction covers interest paid on the loan, while the credits cover qualified tuition and fees paid to the school.