Topic 456 – Student Loan Interest Deduction
You may be able to deduct interest you pay on a qualified student loan. Generally, the amount you may deduct is the lesser of $2,500 or the amount of interest you actually paid.
The deduction is claimed as an adjustment to income so you do not need to itemize your deductions on Schedule A Form 1040.
You can claim the deduction if all of the following apply:
You paid interest on a qualified student loan in tax year 2011
You are legally obligated to pay interest on a qualified student loan
Your filing status is not married filing separately
Your modified adjusted gross income is less than a specified amount which is set annually, and
You and your spouse, if filing jointly, cannot be claimed as dependents on someone else's return
A qualified student loan is a loan you took out solely to pay qualified higher education expenses. See Publication 970, Tax Benefits for Education, and the instructions for Form 1040 to determine if your expenses qualify.
If you paid $600 or more of interest on a qualified student loan during the year, you will receive a Form 1098-E (PDF), Student Loan Interest Statement, from the entity to which you paid the student loan interest.
The amount of your student loan interest deduction is phased out (gradually reduced) if your MAGI is between $60,000 and $75,000 ($120,000 and $150,000 if you file a joint return). You cannot take a student loan interest deduction if your MAGI is $75,000 or more ($150,000 or more if you file a joint return).
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