If you’re paying off student loans, you may be able to get a tax break on the interest. The student loan interest deduction lets many borrowers reduce their taxable income by up to $2,500 a year. This deduction isn’t just for federal loans—interest from private student loans may also qualify, depending on how the loan was used and who took it out.
What Is the Student Loan Interest Deduction?
The student loan interest deduction lets you subtract some or all of the interest you paid on qualified student loans from your taxable income. This can lower the amount of income the IRS uses to calculate your taxes, which may reduce how much you owe.
You don’t need to itemize your deductions to claim this one. It’s called an “above-the-line” deduction because it comes off your income before the IRS applies either the standard deduction or itemized deductions. That means you can still take the standard deduction and claim this one too.
You can deduct up to $2,500 in student loan interest, but the exact amount depends on how much interest you paid and your income level.
When Private Student Loans Qualify
You may be able to deduct interest paid on private student loans, but only if the loan meets certain conditions. The IRS doesn’t distinguish between federal and private loans when it comes to this deduction. What matters most is how the loan was used and who took it out.
What Makes a Private Loan Eligible?
To qualify, a private student loan must:
- Have been used to pay for qualified education expenses, like tuition, fees, books, and room and board
- Be in your name, and you must be legally required to repay it
- Come from a legitimate lender—not a relative or a retirement account
Common types of eligible loans include:
- Private education loans from banks or credit unions
- Refinanced student loans that were originally used for qualified expenses
What Doesn’t Qualify
Some loans don’t meet the IRS rules for this deduction:
- Personal loans used for general expenses, even if they helped cover school costs
- Loans from family members or informal agreements
- Loans from retirement accounts (like 401(k) withdrawals)
If your loan wasn’t specifically used to cover educational costs at an eligible school, the interest likely won’t qualify for the deduction.
Who Can Claim the Deduction
Even if your loan qualifies, you still need to meet certain requirements to claim the student loan interest deduction.
Filing Status
You cannot claim the deduction if you’re married and filing separately. You may be eligible if you file as single, head of household, qualifying widow(er), or married filing jointly.
2025 Income Limits
Your eligibility is based on your modified adjusted gross income (MAGI). For the 2025 tax year:
- If you file as single, head of household, or qualifying widow(er):
- You can claim the full deduction if your MAGI is $85,000 or less
- The deduction phases out between $85,000 and $100,000
- You can’t claim the deduction if your MAGI is $100,000 or more
- If you’re married filing jointly:
- You can claim the full deduction if your MAGI is $170,000 or less
- The deduction phases out between $170,000 and $200,000
- You can’t claim the deduction if your MAGI is $200,000 or more
How the Phase-Out Works
If your income is in the phase-out range, the amount you can deduct goes down. Here’s how to estimate your deduction:
- Subtract the lower end of the phase-out range from your MAGI.
- Divide the result by $15,000 (single) or $30,000 (married filing jointly).
- Multiply that percentage by $2,500.
- Subtract that amount from $2,500 to get your allowed deduction.
Example for a single filer:
- MAGI: $90,000
- Excess income: $90,000 – $85,000 = $5,000
- Phase-out percentage: $5,000 ÷ $15,000 = 0.333
- Reduction amount: $2,500 × 0.333 = $833
- Allowed deduction: $2,500 – $833 = $1,667
So, with a MAGI of $90,000, you could deduct $1,667 in student loan interest.
Other Requirements
To qualify, the loan must be in your name and you must be legally required to repay it. You also can’t be claimed as a dependent on someone else’s tax return. Finally, the loan must have been used for qualified education expenses, like tuition, fees, and course materials.
How to Claim the Deduction
If you’ve paid interest on a qualified student loan, you may be able to claim up to $2,500 on your federal tax return. Here’s what you need to know to do it correctly.
Form 1098-E
If you paid $600 or more in interest during the year, your lender should send you a Form 1098-E. This form shows the exact amount of interest you paid and can be used to complete your tax return. If you don’t receive it but think you should have, contact your lender to request a copy or check your online loan account.
Where to Report It
You don’t need to itemize deductions to claim this one. It’s listed on Schedule 1 of Form 1040, which is used for adjustments to income. Most tax software will guide you to enter the interest amount and apply it correctly.
Standard Deduction Still Applies
Because this is considered an “above-the-line” deduction, you can still claim the standard deduction and reduce your taxable income even further with the student loan interest deduction.
How Much You Could Save
The student loan interest deduction can lower your taxable income, which may reduce the amount of tax you owe. How much it saves you depends on your tax bracket and how much interest you paid during the year.
Let’s say you qualify for the full $2,500 deduction and you’re in the 22% tax bracket. Here’s how the math works:
- $2,500 × 0.22 = $550
In this case, the deduction would lower your tax bill by $550. If you paid less than $2,500 in interest, or if your income puts you in a lower tax bracket, your savings would be smaller.
Keep in mind that this deduction reduces your taxable income, not your tax bill directly. So it doesn’t work like a tax credit, which reduces what you owe dollar for dollar. But it can still help you keep more of your money, especially if you’re paying interest every year.
\Wrapping Up
If you’re paying off private student loans, the interest you pay may help lower your tax bill—if you meet the IRS requirements. You could deduct up to $2,500 in interest each year, even if you take the standard deduction.
The key is making sure the loan was used for qualified education expenses and that your income and filing status make you eligible. Track how much interest you pay each year, look for Form 1098-E from your lender, and follow the steps to report it on your tax return.
It won’t wipe out your loan, but it could help you keep more of your income as you pay it down.
