The federal government allows students to deduct up to $2,500 in interest paid on student loans each year. When you file IRS Form 1040 or 1040A, you include this deduction as an adjustment to income. This means you don’t need to itemize your federal tax deductions using Schedule A. Income ceilings do exist on this benefit.
|Maximum Benefit||Up to $2,500 in interest paid on student loans annually|
|Qualifying loans||Loans borrowed for education purposes for you, your spouse or dependent student. Does not include loans from qualified employer plans.|
$75,000 if tax filing status is single, head of household, or qualifying widow(er), or
$150,000 if married filing a joint return
For more information on this deduction as well as other educational tax benefits, check out the IRS website (http://www.irs.gov/publications/p970/).
TIP: Consider maximizing this tax benefit by applying any refund you get from the government as a prepayment on your student loan.