Tax Break for College Students

If you paid interest on a qualified student loan, you may be able to deduct up to $2,500 on your individual federal income tax return. This deduction is claimed as an adjustment to income; it is not an itemized deduction. A qualified student loan is a loan you took out solely to pay higher education expenses. To take this deduction you must not be claimed as a dependent on someone else’s tax return.

If you were lucky enough to have mom and dad pay your loan, and they do not claim you as a dependent, you get to deduct up to $2,500 of the interest on the loan. The reason for this is that your parents are not legally obligated to make the payments. You are legally obligated to pay the student loan debt.

In order to be eligible for this tax break, your modified adjusted gross income (MAGI) must be less than $75,000. If married, filing jointly, your MAGI must be less than $150,000.