6.4 Student Loan Interest Deduction
Key Takeaways
- Maximum student loan interest deduction is $2,500 per return as an above-the-line adjustment on Schedule 1.
- For 2025, MAGI phase-out ranges are $85,000-$100,000 (Single/HOH) and $170,000-$200,000 (MFJ); MFS cannot claim this deduction.
- The loan must be for qualified higher education expenses (tuition, fees, room and board, books, supplies, transportation) for the taxpayer, spouse, or dependent at the time the debt was incurred.
- The taxpayer must be legally obligated on the loan and cannot be claimed as a dependent; Form 1098-E reports interest of $600+.
- Employer-paid student loan principal/interest under §127 educational assistance ($5,250 annual cap) was made permanent by OBBBA — amounts excluded from wages cannot also be claimed by the employee as student loan interest deduction.
Maximum Deduction
$2,500 per return (above-the-line; no itemizing required).
2025 MAGI Phase-Out Ranges
| Filing Status | Full Deduction | Phase-Out | No Deduction |
|---|---|---|---|
| Single/HOH | < $85,000 | $85,000-$100,000 | > $100,000 |
| MFJ | < $170,000 | $170,000-$200,000 | > $200,000 |
| MFS | Cannot claim | N/A | N/A |
Who Can Claim?
- Legally obligated to pay the interest
- Not claimed as a dependent on someone else's return
- Not filing MFS
Qualified Higher-Education Expenses
| Category | Examples |
|---|---|
| Tuition & Fees | Course tuition, lab fees |
| Room & Board | Dormitory, meal plans |
| Books & Supplies | Textbooks, equipment |
| Transportation | Travel to/from school |
Expenses must be for the taxpayer, spouse, or a dependent at the time the debt was incurred.
Loans That Do NOT Qualify
- Loans from related parties (family members)
- Loans from a qualified employer plan
Form 1098-E
Lenders report interest of $600 or more on Form 1098-E.
Coordination with Employer Educational Assistance (§127)
OBBBA made permanent the rule allowing employers to pay an employee's student loan principal or interest tax-free under the §127 educational assistance program, subject to the $5,250 annual cap (combined with tuition and other §127 benefits). Amounts paid by the employer and excluded from the employee's wages cannot also be claimed by the employee as student loan interest under §221.
EA Exam Tips
- MFS cannot claim this deduction
- Maximum is $2,500 per return
- Cannot be a dependent on another return
- Know 2025 phase-outs: $85K-$100K (Single/HoH); $170K-$200K (MFJ)
- Coordinate with §127 employer student-loan payments ($5,250 cap)
Exam Focus
For Student Loan Interest Deduction, place the deduction in the return workflow. Student loan interest is an adjustment to income, so candidates should know who paid the interest, who was legally obligated on the loan, whether the loan funded qualified education expenses, and whether filing status or dependency rules block the deduction. Exam questions often test the difference between paying someone else's debt voluntarily and deducting interest on a qualified loan for yourself, a spouse, or a dependent at the time the debt was incurred.
For 2025, what is the MFJ MAGI phase-out range for the student loan interest deduction?
Tom files MFS and paid $2,800 in student loan interest in 2025. His MAGI is $60,000. What can he deduct?
Which loan would NOT qualify for the student loan interest deduction?