If I have a student loan from finishing my graduate degree, can I deduct its interest payments from salary for tax purposes? Is there any education related tax credit that can be applied for payments made against a student loan?
In general, yes, the interest portion of student loan payments is tax deductible, but this is not always the case, as tax law (as always) is more complicated than it could be:
- Review Chapter 4 of IRS Publication 970 for the details of when it is tax deductible
- There are income restrictions - if you make more than $75,000 as a single income or $150,000 while married the interest payments are not tax deductible
- Remember that you'll have to itemize to get this deduction. The standard deduction is $5,700 for a single person, and usually you'll have to either give a lot of money to charity or have a mortgage where mortgage interest is tax deductible in order to see any benefit (for example, are you actually paying more than $5700 in student loan interest per year? That's a lot of loans).
- For all the possible tax deductions/credits, see the entire Publication 970