What Is the Student Loan Interest Deduction?

The student loan interest deduction lets you subtract up to $2,500 of interest paid on qualified student loans from your income.

This is an above-the-line deduction. That means:

• You do not need to itemize.
• It reduces your Adjusted Gross Income (AGI).
• A lower AGI can help you qualify for other tax benefits.

The deduction is based on:

• Interest paid during the tax year
• Your Modified Adjusted Gross Income (MAGI)
• Your filing status
• Whether the loan qualifies

How the Student Loan Interest Deduction Calculator Works

The calculator uses current IRS rules under 26 U.S.C. § 221 and IRS Publication 970.

It calculates your deduction in five main steps:

1. Check eligibility
2. Confirm qualified loan and expenses
3. Apply the $2,500 maximum limit
4. Apply income phase-out rules
5. Estimate tax savings

Let’s walk through each input so you understand what it does.

Step 1: Select the Tax Year

The calculator allows you to choose:

• 2024
• 2023
• 2022
• 2021
• 2020

Each year has slightly different income phase-out ranges.

For example:

2023 and 2024 phase-out ranges:

• Single / Head of Household / Qualifying Widow(er):
  $75,000 to $90,000
• Married Filing Jointly:
  $155,000 to $185,000

If your income is:

• Below the range → Full deduction
• Within the range → Partial deduction
• Above the range → No deduction

Step 2: Choose Your Filing Status

Available options:

• Single
• Head of Household
• Married Filing Jointly
• Married Filing Separately (Not eligible)
• Qualifying Widow(er)

Important rule:

If you file Married Filing Separately, you cannot claim this deduction.

Step 3: Enter Your Modified Adjusted Gross Income (MAGI)

Your MAGI determines whether your deduction is reduced.

If your MAGI is:

• Below the phase-out start → You may qualify for full deduction
• Within the phase-out range → Deduction is reduced proportionally
• Above the phase-out end → Deduction is eliminated

Example

If you’re single in 2024:

• Phase-out range: $75,000 to $90,000
• Your MAGI: $82,500

You are halfway through the phase-out range.

That means your deduction will be reduced by about 50%.

The calculator handles this automatically.

Step 4: Enter Student Loan Interest Paid

Look at Box 1 of Form 1098-E from your loan servicer.

Enter the total interest paid for the year.

Keep in mind:

• The maximum deduction is $2,500 per return
• Not per person
• Not per loan

If you paid $3,200 in interest, the maximum you can deduct is still $2,500.

Step 5: Confirm the Loan Type

Only qualified education loans are eligible.

Qualified loan types include:

• Federal Subsidized or Unsubsidized Loans
• Federal PLUS Loans
• Private student loans used for education
• Consolidation loans (student loans only)
• Refinanced student loans (same borrower)

Not qualified:

• Personal loans
• Credit cards
• Home equity loans
• Employer-paid loans excluded from income

If the loan does not qualify, the calculator will mark you ineligible.

Step 6: Confirm Legal Obligation

You must be legally liable for the loan.

Eligible situations:

• You are the borrower
• You are jointly liable (co-signer)
• Parent PLUS loan (parent liable)
• Married Filing Jointly and spouse is liable

Not eligible:

• Loan taken for a dependent where you are not legally responsible

Step 7: Confirm Qualified Education Expenses

Loan funds must have been used for:

• Tuition and required fees
• Required room and board
• Books and supplies

Not eligible uses:

• Transportation
• Personal expenses

Step 8: Enrollment Requirement

The student must have been enrolled at least half-time when the loan was taken.

Less than half-time enrollment does not qualify.

Step 9: Dependent Status

If someone else claims you as a dependent, you cannot claim this deduction.

The calculator will automatically disqualify you if this applies.

Step 10: Spouse Interest (Married Filing Jointly)

If filing jointly:

• You and your spouse combine interest paid.
• The total deduction still cannot exceed $2,500.

How the Phase-Out Calculation Works

The calculator uses a linear phase-out method.

Formula:

Reduction Percentage =
(MAGI − Phase-Out Start) ÷ Phase-Out Range

Then:

Allowed Deduction =
Qualified Interest × (1 − Reduction Percentage)

The result is rounded to the nearest $5, following IRS rules.

Example Scenarios

Example 1: Full Deduction

• Filing: Single
• MAGI: $60,000
• Interest Paid: $2,000

Result:

• Full $2,000 deduction
• Estimated tax savings at 22% bracket: $440

Example 2: Partial Deduction

• Filing: Single
• MAGI: $82,000
• Interest Paid: $2,500

Because income is within the phase-out range, the deduction is reduced.

You may only qualify for around $1,300 to $1,400 depending on exact income.

Example 3: Phased Out

• Filing: Married Filing Jointly
• MAGI: $190,000
• Interest Paid: $2,500

Income exceeds $185,000 phase-out limit.

Result:

• No deduction allowed

Estimated Tax Savings

The calculator also shows estimated savings using a 22% tax bracket.

Example:

If your final deduction is $2,000:

$2,000 × 22% = $440 in estimated tax savings.

Your actual savings depend on your real tax bracket.

Key Rules to Remember

• Maximum deduction: $2,500 per return
• Must be legally liable for the loan
• Must not file Married Filing Separately
• Must not be claimed as a dependent
• Loan must be for qualified education expenses
• Subject to MAGI phase-out

Why Use a Student Loan Interest Deduction Calculator?

Doing this by hand can be confusing because:

• Income limits change by year
• Phase-out math is not simple
• Filing status matters
• Spouse interest affects totals

The calculator handles all of that instantly and clearly shows:

• Maximum possible deduction
• Qualified interest
• Phase-out range
• Phase-out percentage
• Final deduction
• Estimated tax savings
• Eligibility status