Skip to main content
  1. Life
  2. Education & Schools
  3. Education Policies

2013 tax returns: What you need to know about student loan interest deductions

See also

The Institute for College Access and Success reports that 70 percent of 2012 college graduates left school with outstanding student loans. The level of debt for these graduates nationwide averages $29,400. Repaying these loans is a challenge in an economy with high unemployment. Those that do find work often are underemployed with less than full-time hours and low wages.

The U.S. tax code does provide some relief for graduates in the form of student loan interest deductions. While interest on loans other than home mortgages is usually not deductable, the tax code provides a special deduction for money borrowed to finance higher (post-secondary) education.

The difference between a tax deduction and a tax credit

Tax deductions lower the amount of income that is subject to tax. Tax credits are applied against the amount of tax owed. While graduates may be eligible for tax credits for some education expenses, student loan interest is a deduction that will lower a taxpayer’s taxable income.

Who qualifies for the student loan interest deduction

Taxpayers with modified adjusted gross incomes less than $75,000 ($150,000 for married filing jointly taxpayers) who paid interest on a qualified student loan for themselves, spouses or dependents may take this deduction.

The taxpayer must be the individual making the loan payments and be responsible for repayment in order to take the deduction. For example, if the loan is in the student’s name, and a parent is making the loan payments, no deduction is allowed.

Additionally, a taxpayer who qualifies as a dependent on another’s tax return, whether or not the exemption is claimed, may not take the deduction. No deduction is allowed for taxpayers filing as married filing separate.

Which loans qualify

A qualified student loan may be a federal or a private loan used to pay for:

  • Tuition and fees
  • Room and board
  • Books, supplies and equipment
  • Other necessary expenses (such as transportation)

The amount used for room and board must not exceed the actual amount charged for student housing by the educational institution or the housing allowance calculated by the institution for financial aid purposes.

How to take the deduction

The student loan interest deduction is an adjustment to income reported on line 33 of IRS form 1040. Taxpayers may take this deduction without filing a Schedule A, Itemized Deductions form. Borrowers will receive a form 1098-E from their lending institution in January showing the total amount of interest paid in the prior year. Up to $2,500 may be deducted as an adjustment to income.

Advertisement

Life

  • Dead babies found
    Seven dead babies were found in Utah resident Megan Huntsman's old home
    Video
    Shocking Discovery
  • Kendall Jenner
    Get the Coachella looks: Kendall Jenner’s nose ring, green hair and edgy nails
    Camera
    Coachella Look
  • Dog's Easter basket
    How to fill your dog’s Easter basket with the perfect toys
    Easter Basket
  • Rabbit owners
    Bringing home the bunny: Important information for rabbit owners
    Camera
    7 Photos
  • Haunted island
    The world’s most haunted island may soon be the most haunted luxury resort
    Haunted Resort
  • Sunken ferry
    Search continues for missing passengers after a ferry sinks off the South Korean coast
    Video
    Sunken Ferry

Related Videos:

  • Good turnout for Citrus Grove’s ‘Awareness Walk’
    <div class="video-info" data-id="517930895" data-param-name="playList" data-provider="5min" data-url="http://pshared.5min.com/Scripts/PlayerSeed.js?sid=1304&width=480&height=401&playList=517930895&autoStart=true"></div>
  • Easter vigil and day story time
    <iframe width="560" height="315" src="//www.youtube.com/embed/AB9-wzvzZWI?VQ=HD720&amp;autoplay=1"></iframe>
  • Quotes about marijuana for National Pot Smoking Day 2014
    <iframe width="420" height="315" src="//www.youtube.com/embed/54xWo7ITFbg?VQ=HD720&amp;autoplay=1"></iframe>

User login

Log in
Sign in with your email and password. Or reset your password.
Write for us
Interested in becoming an Examiner and sharing your experience and passion? We're always looking for quality writers. Find out more about Examiner.com and apply today!