Student Loan Interest Tax Deduction: What Borrowers Can Claim in 2026

By Student Relief Solutions Editorial — Reviewed by Marcus Whitfield

If you paid interest on a qualified student loan in 2025, you may be able to deduct up to $2,500 from your taxable income — without itemizing deductions. Here's how to claim it correctly and who gets phased out.

The short version

The student loan interest deduction lets eligible borrowers reduce their adjusted gross income by up to $2,500 per year for interest paid on qualified student loans. It's an "above-the-line" deduction, meaning you can claim it even if you take the standard deduction. The deduction phases out at higher income levels and disappears entirely above the ceiling. You'll receive a Form 1098-E from your loan servicer if you paid $600 or more in interest in 2025. If you paid less than $600, you may still be able to deduct it — you'll just need to get the exact figure from your servicer account directly.

Eligibility requirements

Per IRS Publication 970 (Tax Benefits for Education), you can deduct student loan interest if all of the following are true:

• You paid interest on a qualified student loan during the tax year
• You are legally obligated to pay the interest (your name is on the loan)
• Your filing status is not "married filing separately"
• No one else claims you as a dependent on their tax return
• Your modified adjusted gross income (MAGI) is below the phase-out ceiling (see thresholds below)

What counts as a "qualified student loan"

Per IRS Publication 970, a qualified student loan is a loan taken out solely to pay qualified education expenses for:

• You, your spouse, or a person who was your dependent when the loan was taken out
• A student enrolled at least half-time in a degree or certificate program at an eligible educational institution

Qualified education expenses include tuition, fees, books, supplies, room and board (up to certain limits), and other necessary expenses. Loans from family members or employer benefit plans don't qualify. Both federal and private student loans qualify, with one important caveat for refinanced loans covered below.

2026 MAGI phase-out thresholds

The deduction phases out between two MAGI thresholds. Borrowers below the phase-out floor get the full deduction. Borrowers between the floor and ceiling get a partial deduction. Borrowers above the ceiling get nothing. Per IRS Topic 456 and IRS Revenue Procedure 2024-40 (the inflation-adjusted 2025 thresholds applicable on your 2025 return filed in 2026):

• Single, head of household, qualifying surviving spouse: Phase-out begins at $75,000 MAGI; deduction eliminated at $90,000 MAGI
• Married filing jointly: Phase-out begins at $155,000 MAGI; deduction eliminated at $185,000 MAGI
• Married filing separately: Not eligible, regardless of income

Note: The IRS adjusts these thresholds annually for inflation. The figures above reflect the 2025 tax year (the return you file in 2026). Verify the current-year thresholds at irs.gov/taxtopics/tc456 or in Publication 970 for the applicable year.

How the phase-out works: a calculation example

If your MAGI falls within the phase-out range, you calculate a reduced deduction. The formula, per Publication 970:

1. Calculate how far your MAGI is above the phase-out floor
2. Divide that amount by the phase-out range ($15,000 for single; $30,000 for married filing jointly)
3. Multiply that fraction by your otherwise-allowable deduction (up to $2,500)
4. Subtract that amount from $2,500 to get your actual deduction

Example (single filer): You paid $2,500 in student loan interest. Your MAGI is $82,500. You are $7,500 above the $75,000 floor. The phase-out range is $15,000. $7,500 ÷ $15,000 = 0.5. 0.5 × $2,500 = $1,250 reduction. Your deduction is $2,500 − $1,250 = $1,250.

How much does the deduction actually save you?

The deduction reduces your taxable income, not your tax bill directly. The dollar savings depend on your marginal tax bracket. For a single filer in the 22% bracket who claims the full $2,500 deduction, the tax savings are $2,500 × 0.22 = $550. For a filer in the 12% bracket, $2,500 × 0.12 = $300. The deduction is worth more to higher-bracket filers, but it phases out at higher income levels — creating a somewhat ironic structure where the people who benefit most are the ones closest to the phase-out ceiling.

How to claim the deduction

1. Get your Form 1098-E. Your servicer is required to send this if you paid $600 or more in student loan interest in 2025. You can also download it from your servicer's online account. If you paid less than $600, contact your servicer for the exact interest amount — you may still deduct it.
2. Calculate your MAGI. For most borrowers, MAGI = adjusted gross income (AGI) from your 1040. Some add-backs apply (student loan interest already deducted, foreign income exclusions, etc.) — see Publication 970 Worksheet 4-1 for the exact calculation.
3. Use Form 1040, Schedule 1. The student loan interest deduction is reported on Schedule 1, Line 21. You do not need to itemize. You do not need a separate form.
4. Tax software handles this automatically. TurboTax, H&R Block, FreeTaxUSA, and similar products will calculate the deduction and phase-out automatically once you enter the 1098-E information.

Refinanced student loans: does the deduction still apply?

Here's the part most borrowers miss: if you refinanced federal loans into a private loan, the deduction still applies to the private refinance loan if the refinance proceeds were used exclusively to pay off the original qualified student loan. Per IRS Publication 970, a loan used to refinance a qualified student loan also qualifies, as long as the new loan is used solely for that refinancing purpose. A "cash-out" refinance — where you borrow more than needed to pay off the student loans and take cash — disqualifies the cash-out portion. The interest on the student loan payoff portion remains deductible; interest on the excess cash is not.

If you refinanced through a lender that rolled student loan debt and other consumer debt (e.g., credit cards) into one loan, only the portion attributable to the original qualified student loan debt is deductible. Keep records of the payoff amounts to support this allocation.

What about IDR interest: can you deduct interest that the government is covering?

Under income-driven repayment plans, some borrowers' monthly payments don't cover all accruing interest, meaning interest continues to build on the principal. Only interest you actually paid (as reported on Form 1098-E) is deductible — not accrued but unpaid interest. If you're on IBR and your servicer reports $400 in interest paid (because that's all your monthly payments covered), that $400 is your deductible amount, not the total interest that accrued.

Parent PLUS loan interest: who deducts it?

If a parent took out a Parent PLUS loan for a student, the parent is the borrower and the one legally obligated to repay. The parent claims the deduction — not the student — as long as the parent isn't claimed as a dependent by someone else and meets the income requirements. If the student voluntarily makes payments on the parent's Parent PLUS loan, the student cannot deduct the interest (the student isn't legally obligated). If the parent makes payments, the parent can.

Common mistakes

• Claiming the deduction when you're a dependent. If someone claims you as a dependent (common for students whose parents still claim them), you cannot take the student loan interest deduction. The person who claims you also can't deduct it, because the loan is in your name, not theirs.
• Not requesting the 1098-E when interest is under $600. Servicers only mail the form when interest paid is $600+. If you paid $400 in interest, it's still deductible — log in to your servicer's account and pull the year-end interest statement.
• Using 1040 line 1 instead of Schedule 1. The deduction goes on Schedule 1, not directly on the main 1040. Tax software handles this, but manual filers sometimes miss it.
• Calculating MAGI incorrectly. For most borrowers MAGI = AGI. But if you have foreign earned income exclusions, housing exclusions, or certain retirement contribution adjustments, the MAGI calculation differs. See Publication 970 Worksheet 4-1.

Related federal loan topics

The interest deduction is one of the few direct tax benefits for student loan borrowers. For borrowers managing repayment more broadly, see our guides on income-driven repayment plans in 2026 and federal student loan repayment options.

This article was generated by AI under editorial supervision. All program rules and figures are sourced from primary government documents (IRS.gov, Publication 970, studentaid.gov). This is information, not financial or tax advice — talk to a fiduciary, CPA, or your servicer about your specific situation.