How To Deduct Student Loan Interest

Graduates can deduct the amount of interest that on their student loans accumulates each year

How To Deduct Student Loan Interest
August 30, 2021

Student loan debt can be a financial burden on some graduates, and Congress has attempted to ease some of the stress this can cause. The interest a borrower accumulates on their loan throughout the year is tax deductible, although this has not always been the case. Since 1997, borrowers have been able to claim the deduction even if they do not itemize their deductions.

This makes the deduction of an income adjustment or a deduction that is taken above the line rather than a standard type of deduction. It reduces the taxable income a borrower submits to the IRS, lowering the amount used for calculating whether the borrower must pay extra income tax.

There are several guidelines that apply to this deduction. The deduction is capped at $2,500 each year, and that cap does not change with regard to marital status. Married couples may only claim $2,500, even if they each have a student loan. If a borrower pays extra interest beyond what is due, they may claim all the interest paid up to the cap, even if it was not required.

The IRS states that for graduates who received help to pay their student loans, any interest paid by others should be considered as paid by the student. It does not matter who made the payment—the student can deduct all the interest paid.

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