Generally, taxpayers can only deduct home mortgage interest, investment interest, and business interest. However, interest paid on student loans used to pay tuition, room and board and related expenses for qualified higher education is an above-the-line deduction. The deduction is limited to $2,500.

The deduction for student loan interest is allowed whether or not a taxpayer itemizes deductions. Qualifying loans can include government student loans, consumer loans, and loans by unrelated third parties.
The annual deduction begins to phase out when a taxpayer’s modified AGI reaches the lower end of the phase out range and is completely phased out at the top of the range. The phase-out range is adjusted annually for inflation. The table below indicates the phase out ranges for each filing status. Married individuals who file separately and taxpayers who are claimed as a dependent of another are not allowed to take this deduction. The phase-outs are inflation adjusted in some years.

Phase-Out AGI
Filing Status
2004 – 2016
Unmarried Filing Status
65,000 – 80,000
65,000 – 80,000
Joint Filing Status
130,000 – 160,000
135,000 – 165,000
Married Separate
No Deduction Allowed
Dependent of Another
No Deduction Allowed

If you overlooked this deduction in a prior year, it is not too late. We can assist you in amending your prior year’s returns to take advantage of this deduction.

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