Tax Facts

8540 / Is the interest on education loans deductible?

An above-the-line deduction is available to certain taxpayers for interest paid on a “qualified education loan.”1 The deduction is limited (in 2025) to $2,500 of such interest. However, the deduction is phased out for taxpayers with modified AGI between $85,000 and $100,000 ($170,000 and $200,000 for joint returns). Certain other requirements must be met for the deduction to be available.2

The individual claiming the deduction must be legally obligated to make the interest payments under the terms of the loan. If a third party who is not legally obligated to make a payment of interest on a qualified education loan makes an interest payment on behalf of a taxpayer who is legally obligated to make the payment, then the taxpayer is treated as receiving the payment from the third party and, in turn, paying the interest.3

The deduction may not be taken: (1) by an individual who may be claimed as a dependent on another’s tax return; (2) if the expense can be claimed as a deduction elsewhere on the return; or (3) by married taxpayers filing separate returns.4

1. IRC §§ 163(h)(2)(F), 221.

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