8048 / Is student loan interest deductible?

An above-the-line deduction (see Q 715) is available to lower and middle income taxpayers for interest paid on a qualified education loan (i.e., college loans – see below) subject to certain limitations.¹ The 2017 tax reform legislation did not change the rules governing the deductibility of student loan interest. However, the Act does provide that income resulting from the discharge of student loan debt because of the death or permanent and total disability of the borrower is not included in taxable income.² This provision is effective for loans that are discharged after December 31, 2017.

The amount of the deduction is limited to a maximum of $2,500.³ The deduction is phased out ratably for taxpayers with modified adjusted gross income (MAGI–see below) between $100,000 and $130,000 (married filing jointly) or $50,000 and $65,000 (single).⁴ The $50,000 and the $100,000 amounts are adjusted for inflation (as rounded to the next lowest multiple of $5,000).⁵ In 2024, the indexed levels are $165,000-$195,000 (married filing jointly) and $80,000-$95,000 (single filers).⁶ For 2023, the indexed levels are $155,000-$185,000 (married filers) and $75,000-$95,000 (single filers). The phaseout is accomplished by reducing the otherwise deductible amount by the ratio that the taxpayer’s MAGI over the applicable limit bears to $15,000 ($30,000 for a couple filing jointly) (the deduction cannot be reduced below zero).

Example: In 2024, Mr. and Mrs. Green paid $900 in interest on a student loan that otherwise qualifies for the deduction under the statutory requirements described below. The Greens’ MAGI in 2024 was $165,000. The ratio that their MAGI in excess of $155,000 [$165,000 – $155,000 = $10,000] bears to $30,000 is one to three; consequently, the amount otherwise deductible is reduced by one-third, to $600 [$900 – (⅓ × $900) = $600].

Modified adjusted gross income is the taxpayer’s adjusted gross income as determined before the deduction for qualified tuition and related expenses⁷ (see Q 8054) and the exclusions for income derived from certain foreign sources or sources within United States possessions,⁸ and after the inclusion of any taxable Social Security benefits,⁹ any deductible IRA contributions,¹⁰ adjustments for passive activity losses or credits¹¹ (see Q 8010), the exclusion for savings bond interest used for education expenses¹² (see Q 7686), and the exclusion for certain adoption expenses.¹³