Is Student Loan Interest Deductible? Income Limits and How to Claim

Yes, student loan interest is deductible on your federal return, up to $2,500 per year, and you can claim it whether or not you itemize.¹ The deduction lowers your taxable income rather than cutting your tax bill dollar for dollar, so what it actually saves you depends on your marginal rate. Whether you qualify comes down to your income, your filing status, and the type of loan you’re paying on.

Who Can Claim the Deduction

You have to meet all of these conditions:¹

You are legally obligated to repay the loan (your name is on the promissory note as borrower or cosigner).
The loan was taken out solely to pay qualified higher education expenses.
You are not filing as married filing separately.
Your modified adjusted gross income is below the annual cap for your filing status.
No one else claims you (or your spouse, if filing jointly) as a dependent.

A qualified student loan is one taken out for you, your spouse, or someone who was your dependent when you borrowed the money. The student had to be enrolled at least half-time in a degree or certificate program at an eligible school, which covers most accredited colleges, universities, and vocational programs.²

Because the deduction depends on legal obligation, a parent with a Parent PLUS loan can deduct the interest, but a student who helps with those payments cannot, since the student isn’t the borrower. Cosigners can claim the deduction for interest they actually pay, provided they meet the other rules.¹

Income Limits for 2025 and 2026

The cap is $2,500 per return no matter how many loans you carry or how much interest you paid.³ Whether you get the full amount, a reduced amount, or nothing depends on your modified adjusted gross income (MAGI), which is your AGI with certain items added back. The phase-out thresholds are adjusted each year for inflation.²

For the 2025 tax year:³

Single or head of household: the deduction phases out between $85,000 and $100,000 of MAGI.
Married filing jointly: the phase-out runs from $170,000 to $200,000.

For 2026, the single range stays at $85,000 to $100,000, and the joint range moves up to $175,000 to $205,000. If your income falls inside the window, the deduction is prorated; the closer you sit to the top of the range, the less you can claim.

What Interest and Loans Count

The deduction covers required monthly interest and any interest you pay voluntarily, including payments made during a grace period, deferment, or forbearance.¹ Loan origination fees that represent a charge for borrowing (rather than a service fee) count as interest, and so does capitalized interest that your servicer added to your principal and you later paid off.⁴

Refinanced and consolidated loans still qualify as long as the new loan was used only to pay off one or more qualified student loans belonging to the same borrower. If you refinance for more than the original balance and use the extra funds for anything outside qualified education expenses, the whole refinanced loan loses eligibility, not just the extra portion.³

Loans That Don’t Qualify

Some education-related borrowing is shut out of the deduction entirely:

Money borrowed from a relative (parent, sibling, or other related person) does not qualify, even if you spent every dollar on school.²
Loans from a qualified employer retirement plan, such as a 401(k) loan taken to pay tuition, are excluded.²
Mixed-use loans are disqualified in full. If you borrowed a lump sum and used part for tuition and part for a car or home project, the entire loan fails the “solely for education” test.⁵

One boundary worth flagging: the Section 127 provision that let employers pay up to $5,250 per year of an employee’s student loans tax-free expired on December 31, 2025. Unless Congress extends it, employer loan repayment assistance received in 2026 counts as taxable wages.⁶ For prior years when an employer did make tax-free payments under Section 127, you could not also deduct the interest covered by those payments.²

How to Claim It on Your Return

If you paid $600 or more in student loan interest during the year, your servicer must send you Form 1098-E, the Student Loan Interest Statement, showing the total interest received.⁷ Paid less than $600? You may not get a 1098-E, but the deduction is still available. Log into your servicer’s portal or request a year-end statement. The figure on Form 1098-E can include capitalized interest and origination fees, so it may exceed the sum of your monthly payments.⁴

Report the deduction on line 21 of Schedule 1 (Form 1040). Schedule 1 flows to line 10 of Form 1040 and reduces your adjusted gross income.⁸ Because it is an above-the-line adjustment, it works whether you take the standard deduction or itemize.¹

Using It Alongside Other Education Tax Breaks

The student loan interest deduction covers interest on past borrowing. Education credits like the American Opportunity Tax Credit and the Lifetime Learning Credit cover tuition and fees paid in the current year. Because they hit different expenses, you can claim the interest deduction and an education credit in the same year. What you cannot do is count the same dollar twice: if an expense was already used to support a tax-free 529 distribution or an education credit, it comes out of the pool of qualified higher education expenses that supports your loan deduction.²

1
Internal Revenue Service. Topic No. 456, Student Loan Interest Deduction
2
Office of the Law Revision Counsel. 26 USC 221 – Interest on Education Loans
3
Internal Revenue Service. Publication 970 (2025), Tax Benefits for Education – Section: Student Loan Interest Deduction
4
Internal Revenue Service. Instructions for Forms 1098-E and 1098-T (2025) – Section: Box 1. Student Loan Interest Received by Lender
5
eCFR. 26 CFR 1.221-1 – Deduction for Interest Paid on Qualified Education Loans After December 31, 2001
6
Internal Revenue Service. Frequently Asked Questions About Educational Assistance Programs
7
Internal Revenue Service. About Form 1098-E, Student Loan Interest Statement
8
Internal Revenue Service. Schedule 1 (Form 1040) 2025 – Section: Part II Adjustments to Income