How Much The Student Loan Interest Deduction Really Saves You.
The one silver lining of having student loan debt is that you can deduct the interest from your taxes. But for many borrowers, especially high earners, that benefit is not as great as it appears. Here’s what you need to know about the student loan interest deduction:
- You may receive some modest tax benefits if you paid interest on your student loans last year. You can claim all the interest you paid as a deduction for up to $2,500 under the federal student loan interest deduction.
- When you claim the student loan interest deduction, you lower how much income the government can tax. In this case, you would lower your income by up to $2,500 if you used the deduction.
- The deduction applies to payments required by your lender as well as interest paid from voluntary payments. So the more you pay, the more you can deduct. You usually can deduct all of the interest you paid on your student loan until the loan is paid off.
- The limits on modified adjusted gross income rises to $160,000 or more if you are married filing jointly. You may not deduct your student loan interest if you file as married filing separately or if someone else claims an exemption for you on a tax return.