Who Can Claim the Parent PLUS Loan Tax Deduction?

The Parent PLUS loan tax deduction lets the parent who borrowed the loan subtract up to $2,500 of student loan interest from their taxable income each year. For tax year 2026, the write-off phases out between $85,000 and $100,000 of modified adjusted gross income for single filers, and between $175,000 and $205,000 for joint filers.¹ The student cannot claim it, and no informal arrangement between parent and child changes that.

Why the Deduction Belongs to the Parent

Federal tax law ties the student loan interest deduction to the person who is legally obligated to repay the debt. Under 26 U.S.C. § 221, the deduction goes to the taxpayer who paid the interest on a qualified education loan, and the statute defines that loan as one the taxpayer personally incurred.² Parent PLUS loans are issued exclusively in the parent’s name. The parent signs the promissory note, the parent’s credit is checked, and the parent bears the full repayment obligation.³

Section 221(c) also blocks anyone who can be claimed as a dependent on another return from taking the deduction themselves.² So the rule works from both directions: the loan isn’t in the student’s name, and the student is typically a dependent when the loan originates.

When the Student Actually Makes the Payments

Plenty of families arrange for the graduate to take over monthly payments while the parent remains the legal borrower. The student is spending real money on interest but can deduct none of it. The IRS treats those payments as if the student gave the money to the parent, and the parent then paid the loan servicer. The parent is the one who may claim whatever deductible interest resulted.

In practice, many parents in this setup skip the deduction because they aren’t tracking payments the student handles. That is money left on the table. If your child is paying the servicer, get the yearly interest total from them at tax time and claim it on your return.

What Has to Be True to Claim It

The student had to be your dependent at the time you took out the loan. This is a snapshot test. If your child was your dependent when you borrowed in 2022 but became financially independent by 2026, you can still deduct interest you pay in 2026. What matters is the relationship when the debt was incurred, not the relationship during the year you claim the deduction.⁴

The student also had to be enrolled at least half-time in a program leading to a degree or certificate at a school eligible to participate in federal student aid programs.⁴ Nearly all accredited colleges meet the institutional test, so enrollment status is the piece that occasionally trips people up.

Finally, the loan proceeds must have gone to qualified higher education expenses. The IRS reads this category broadly for interest deduction purposes: tuition and fees, room and board, books, supplies, equipment, and necessary costs like transportation.⁴ Because PLUS loans are certified by the school’s financial aid office and capped at the cost of attendance, this requirement is usually met automatically.

2026 Income Limits and the Filing Status Trap

For tax year 2026, the deduction begins phasing out at a modified adjusted gross income of $85,000 for single filers and $175,000 for joint filers. It disappears entirely at $100,000 for single filers and $205,000 for joint filers.¹

Inside the phase-out range, the deduction shrinks proportionally. The formula reduces the $2,500 maximum by the ratio of your excess income over the starting threshold to the $15,000 range, or $30,000 for joint filers.² A single filer earning $92,500 would lose roughly half.

One filing status kills the deduction outright: married filing separately. The statute requires married taxpayers to file jointly to claim any student loan interest deduction at all.² If you are weighing separate returns for other reasons, factor in the loss of this write-off.

How to Claim It on Your Return

Your loan servicer must send you Form 1098-E if you paid $600 or more in interest during the calendar year. Box 1 shows the total interest received by the lender, and that is the number you use. Box 1 includes capitalized interest and loan origination fees that represent charges for the use of money.⁵ Most servicers post the form to their online portal by late January. If you paid less than $600, you may not get a 1098-E at all, but the interest you did pay is still deductible. Keep your billing statements so you can add it up yourself.

The deduction is an adjustment to income, sometimes called “above-the-line.” You do not need to itemize. Enter the amount, capped at $2,500, on Schedule 1 of Form 1040, and it flows through to reduce your adjusted gross income.⁴ If you are inside the phase-out range, work through the Student Loan Interest Deduction Worksheet in the Schedule 1 instructions to compute the reduced amount.

Getting this wrong carries real consequences. An inaccurate claim that produces an underpayment can trigger an accuracy-related penalty of 20% on the underpaid tax.⁶ The most common error is a student claiming the deduction on their own return when the PLUS loan is in the parent’s name. That claim will fail once the IRS matches it against 1098-E records showing the parent as the borrower.

Refinancing and Consolidation

Interest paid on a loan used solely to refinance a qualified student loan remains deductible, provided the borrower stays the same and the refinanced amount does not exceed the original balance.⁴ Refinance for more than you owed and spend the extra on anything other than education, and you lose the deduction on the whole refinanced loan.

If the student refinances your PLUS loan into their own name through a private lender, they become the legal borrower of a new loan. Whether they can then deduct the interest depends on whether the new loan meets the qualified education loan definition and whether they meet the income limits. You would no longer have deductible interest, because you would no longer owe anything.

Consolidation into a federal Direct Consolidation Loan does not disturb the deduction. The consolidation loan is still a qualified education loan in the parent’s name, so you continue to claim the interest under the same rules and the same $2,500 cap.⁴ Note that consolidation is also the only route to income-driven payments for PLUS borrowers, and it opens the door only to the Income-Contingent Repayment plan.⁷

A Separate Tax Issue for Parents Nearing Forgiveness

Parents who consolidated PLUS loans and enrolled in Income-Contingent Repayment face a new tax reality starting in 2026. The American Rescue Plan Act’s temporary exclusion of forgiven student loan balances from taxable income expired at the end of 2025. Any remaining balance forgiven after completing an ICR repayment period is generally treated as cancellation-of-debt income and included in the borrower’s gross income for federal tax purposes.

The bill can be substantial. Forty thousand dollars forgiven after 25 years of ICR payments adds $40,000 to your taxable income for that year. Narrow exceptions still apply, including discharge due to the borrower’s death or total and permanent disability. This is a separate item from the annual interest deduction, but parents approaching the end of a long repayment term should plan for it, because the IRS will expect payment on the additional income in the year the forgiveness occurs.

1
Internal Revenue Service. Revenue Procedure 2025-32
2
Office of the Law Revision Counsel. 26 USC 221 – Interest on Education Loans
3
Federal Student Aid. Student and Parent Eligibility for Direct Loans – 2025-2026 Federal Student Aid Handbook
4
Internal Revenue Service. Publication 970 (2025), Tax Benefits for Education
5
Internal Revenue Service. Instructions for Forms 1098-E and 1098-T (2025)
6
Office of the Law Revision Counsel. 26 USC 6662 – Imposition of Accuracy-Related Penalty on Underpayments
7
Federal Student Aid. Top FAQs About Income-Driven Repayment Plans