What the deduction is
IRS Topic 456 allows a deduction for interest paid on a qualified student loan of the lesser of $2,500 or the interest actually paid during the year. It is taken as an adjustment to income on the front of the return, which means you do not need to itemize to claim it, and it reduces adjusted gross income rather than tax directly. The saving is the deduction times your marginal rate: at 22 percent, the full $2,500 is worth $550; the guide federal income tax brackets 2026 shows which rate applies.
Who qualifies
- You paid interest on a qualified student loan during the tax year and are legally obligated to pay it.
- Your filing status is not married filing separately.
- Your MAGI is under the annual limit, set each year; the 2026 range is below.
- Neither you nor your spouse, if filing jointly, can be claimed as a dependent on someone else's return.
A qualified student loan, per Topic 456 and Publication 970, is one taken out solely to pay qualified education expenses that were for you, your spouse or a person who was your dependent when you took out the loan; paid or incurred within a reasonable period of time before or after you took it out; and for education during an academic period for an eligible student. Loans from a related person or made under a qualified employer plan do not qualify. Expenses paid with federal student loan proceeds are treated as paid within the reasonable period.
What counts as interest
| Payment | Treatment (Publication 970) |
|---|---|
| Required monthly interest | counts |
| Voluntary payments of interest, including during deferment or forbearance | count; the deduction includes both required and voluntary interest payments |
| Capitalized interest (unpaid interest added to the balance) | treated as interest, deductible as payments of principal are made |
| Loan origination fee | counts if it was for the use of money rather than for property or services; accrues over the life of the loan |
| Principal | does not count |
The 2026 phase-out
Rev. Proc. 2025-32 sets the 2026 range: the deduction begins to phase out for MAGI over $85,000 ($175,000 on a joint return) and is completely phased out at $100,000 or more ($205,000 joint). Inside the range the deduction shrinks in proportion to how far through the range your MAGI is.
| MAGI, single or head of household | Share of range used | Deduction on $2,500 of interest |
|---|---|---|
| $70,000 | 0% | $2,500 |
| $85,000 | 0% | $2,500 |
| $90,000 | 33% | $1,667 |
| $95,000 | 67% | $833 |
| $100,000 | 100% | $0 |
On a joint return the range is $30,000 wide: a couple with $190,000 of MAGI is halfway through and keeps $1,250 of a $2,500 deduction. MAGI for this purpose is adjusted gross income with a few items added back, including the student loan interest deduction itself, which Publication 970's worksheet handles.
A loan, worked out
A $30,000 loan at 6% repaid over 10 years has a monthly payment of $333. In the first year $1,739 of the $3,997 paid is interest, which is under the $2,500 cap, so a borrower below the phase-out deducts all of it; the interest share falls every year after that as the balance declines. Two such loans, or one at a higher rate, run into the cap in the early years. The student loan calculator shows the interest in each year of a repayment plan, and the loan calculator does the same for a private loan or a refinance.
| Item | Amount |
|---|---|
| Monthly payment | $333 |
| Paid in year one | $3,997 |
| Of which interest | $1,739 |
| Deduction, MAGI below $85,000 | $1,739 |
| Deduction, MAGI $95,000 single | $580 |
| Tax saved at 22%, below the phase-out | $382 |
Claiming it
- Form 1098-E. A lender you paid $600 or more of interest to during the year should send one; use the servicer's statement for smaller amounts.
- Each borrower claims their own. Married couples filing jointly combine the interest from both spouses' loans under the single $2,500 cap; married filing separately cannot claim it at all.
- A refinanced loan still qualifies if it only refinances qualified student loans; borrow more and use the extra for anything other than qualified education expenses, and Publication 970 says none of the interest is deductible.
This guide follows IRS Topic 456, Publication 970 and the 2026 figures in Rev. Proc. 2025-32. The deduction is unrelated to the repayment plan you are on, and 529 plans explained covers the separate rule that lets 529 money repay up to $10,000 of student loans.
Frequently asked questions
How much student loan interest can I deduct?
The lesser of $2,500 or the interest you actually paid during the year, as an adjustment to income, so you do not need to itemize. For 2026 the deduction phases out for modified adjusted gross income between $85,000 and $100,000, or $175,000 and $205,000 on a joint return, and is gone above the top of the range.
Who can claim the student loan interest deduction?
Per IRS Topic 456: you paid interest on a qualified student loan, you are legally obligated to pay it, your filing status is not married filing separately, your MAGI is under the annual limit, and neither you nor your spouse if filing jointly can be claimed as a dependent on someone else's return. The loan must have been taken out solely to pay qualified education expenses for you, your spouse or a person who was your dependent when you took it out, and it cannot come from a related person or a qualified employer plan.
Does capitalized interest or a loan origination fee count?
Publication 970 says capitalized interest is treated as interest and is deductible as payments of principal are made on the loan, and that a loan origination fee counts as interest if it was for the use of money rather than for services, accruing over the life of the loan. Both required and voluntary interest payments count, so interest paid during a deferment or forbearance when no payment was due still qualifies.
What is Form 1098-E?
The Student Loan Interest Statement. Topic 456 says that if you paid $600 or more of interest to a lender during the year you should receive one from that lender; it shows the figure to enter. Interest under $600 to a given lender is still deductible, but you will need the servicer's records rather than the form.
Can parents deduct interest on a loan for their child?
Only if the parent is legally obligated on the loan, took it out to pay expenses for someone who was their dependent at the time, and meets the other tests; a parent who merely makes payments on a loan in the child's name cannot deduct them. The student can deduct interest on a loan in their own name once they are no longer claimed as a dependent.
Sources
- IRS Topic no. 456, Student loan interest deduction (the lesser of $2,500 or interest paid; an adjustment to income; the eligibility tests; the definition of a qualified student loan; the MAGI phase-out; Form 1098-E at $600 or more)
- IRS Publication 970, chapter 4 (required and voluntary payments; capitalized interest; loan origination fees; the reasonable period of time; loans from a related person or a qualified employer plan excluded)
- IRS Rev. Proc. 2025-32, section 4.29 (for taxable years beginning in 2026 the $2,500 deduction phases out for MAGI over $85,000, $175,000 joint, and is completely phased out at $100,000, $205,000 joint)