In this week’s deduction of the week entry we highlight a deduction the IRS created to encourage Americans to attend college – the student loan interest deduction.
Above-the-Line
The student loan interest deduction is another above-the-line deduction. Therefore you can take this deduction even if you do not itemize.
You, Your Spouse, and Dependents
The student loan interest deduction will allow you to deduct the interest on loans issued for yourself, your spouse (f you file jointly), and any qualifying dependents.
Claiming the Deduction
Your lender will send you IRS Form 1098-E at the beginning of the year, which will show the amount of interest paid on student loans for the year. You can then put this amount in the adjustments to income section on your IRS Form 1040 (Line 33) or 1040A (Line 18). Just keep in mind that there is a $2,500 limit on the deduction.
Income Limits
The amount of student loan interest you can deduct is also limited by income. Taxpayers making over $55,000 per year ($70,000 for married couples) will need to prorate the deduction, and those with incomes over $70,000 ($145,000 for married couples) are not eligible to claim the deduction.