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?
asked Mar 1, 2011 at 14:35
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1 Answer
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
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1Student loan interest is typically tax deductible, not student loan principal payments.– Alex BMar 1, 2011 at 18:10
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@Alex, you're right, I edited my answer to help clarify that only the interest portions are tax deductible– CrimsonXMar 1, 2011 at 18:41
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6You don't actually need to itemize to get the student loan deduction. "The student loan interest deduction is taken as an adjustment to income. This means you can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040)." Apr 4, 2011 at 12:47
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Sadly, it appears that if you pay more than $2500 in any given year, you can't deduct any of it above that threshold!– AndyJul 22, 2015 at 5:02