Student loan
interest can be tax-deductible.
About half of all students graduate with some debt. Student loans, however, usually have the lowest interest rates of any loan, and you might be able to deduct the interest you pay. Not all student loan interest is tax-deductible and you must meet IRS requirements for claiming this deduction.
Requirements
You can deduct student loan interest, but only if it paid for legitimate educational expenses, such as books and tuition. You cannot claim this deduction if you are married but filing separately. Should you file a joint return, nobody else may claim you as a dependent on their taxes. Also, the student interest deduction decreases as income rises from $55,000 to $70,000 for single filers and $145,000 for joint returns -- after this limit, you can no longer claim it.
Other Requirements
To deduct student loan interest, you must have paid the interest yourself or for a dependent during the current tax year. You or the student must have enrolled in school at least half-time -- six credits or more -- leading to a degree or certificate during the year to get the interest deduction during college, according to Get Ready for College. After you graduate, student loan interest is still deductible to whoever pays off the loan.
Warning
Taxpayers can only claim a student loan interest deduction when they have a legal obligation to pay back the loan. Some loans, such as the federal Stafford loan, are the sole responsibility of the student -- even if the parents or guardian take over payments.
Tip
In case the parents and student take out a loan to finance the student's education, the status of dependency takes precedence when determining who can claim the deduction. If you receive any tax-free financial aid, such as a federal grant, you must deduct the value of the grant from your qualified expenses.
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