How to Claim Your Student Loan Payments on Your 2023 Taxes | Student Loans and Advice

After a three-year pandemic pause, federal student loan payments resumed for more than 28 million borrowers in October 2023, derailing budgets and increasing monthly expenses for many. But there is a silver lining: the tax deduction.

If you’ve paid interest on your student loans, you may be able to reduce your federal taxable income by up to $2,500 thanks to the student loan interest deduction, or SLID. Not everyone can take this deduction, as it’s limited by your household adjusted income. Learn the rules to find out whether these tax savings apply to you.

If you took out a student loan for yourself, your spouse or your child, you paid some interest on that loan and your modified adjusted gross income is below certain limits, you can deduct the interest on your federal tax return. The interest you’ve paid for any student loan, public or private, is tax-deductible as long as the loan qualifies – it doesn’t only have to be federal student aid.

Keep in mind that the loan payments themselves aren’t deductible, just the interest you paid.

Many federal student loans were eligible for 0% interest for much of 2023. Before you take a student loan interest deduction, check whether you paid interest and if so, the amount you paid. You can find this on your servicer’s website.

To be eligible for the maximum student loan interest deduction of $2,500 for tax year 2023, your modified adjusted gross income must be under $75,000 ($155,000 if filing jointly with your spouse). If your MAGI is between $75,000 and $90,000 ($155,000 and $185,000 if filing jointly), you’re eligible for a portion of the credit. The deduction phases out altogether if you earn above $90,000 ($185,000 for joint returns).

In 2024, the limits are $80,000 ($165,000 for joint returns). If your MAGI is above that but below $95,000 or more ($195,000 or more for joint returns) you’ll receive a partial deduction, with the deduction phasing out completely above those limits.

Jack Wang, college financial aid advisor at Innovative Advisory Group, points out that the person taking the deduction may not be the person making the payments.

“For example, if a student took out loans and is working after graduation, the parents could gift the payments to the graduate by making the loan payments, but the graduate could still take the deduction on their own tax return,” Wang says. “The parents wouldn’t benefit from the tax break, but the graduate would.”

Keep in mind, though, that the deduction is for the person who incurred the debt and is responsible for paying it. Ron Ramer, a certified public accountant with 19 years of experience, cautions students and parents to record the deduction carefully.

“If a student is being claimed as a dependent on another return, then they are not eligible to claim the deduction,” he says. “Likewise, if the debt is in the student’s name and the student is being claimed as a dependent, then the parents are not eligible to claim the deduction.”

But if the student incurred the debt, they’re not a dependent and they meet other qualifications, then they’d be eligible for the deduction – and it’s probably in their best interest to claim it.

Even if your income meets the IRS requirements, it’s not a guarantee you’ll be able to claim the deduction. You can’t take the deduction if:

If you’re unsure if you meet the criteria, the IRS offers an interactive tax tool that can help you determine whether you can deduct your student loan interest.

To determine your deduction amount, you’ll need to know how much interest you paid. You should receive a Form 1098-E from your servicer with this information.

You’ll also need to compute your MAGI. This is your adjusted gross income, or AGI, which is noted on line 11 of the 1040 or 1040-SR federal return form, with foreign income and housing exclusions added back in. Your MAGI determines how much, if any, of the deduction you can take.

If your MAGI is below the limit, you can deduct the full amount of student loan interest paid, up to $2,500. If your MAGI qualifies you for a reduced deduction, you’ll figure it like so:

For example, if you’re filing single, paid $1,000 in interest and your MAGI is $80,000, you’d be able to deduct $667 instead of $1,000:

“Nope,” says Eric Arbore, a Pittsburgh-based CPA and senior tax accountant. “It is a separate deduction that is not affected by deduction type,” he says, so you can claim it no matter what other deductions you are (or aren’t) itemizing.

There are a few documents you’ll need before you can claim the student loan interest deduction on your federal taxes:

Once you’ve gathered your documents, follow these steps to claim the deduction:

It makes sense to maximize the deduction so you can reduce your taxable income as much as possible, which should help reduce your tax liability. There are a few things you can do to get the most out of your student loan interest deduction:

Making student loan payments – especially if your loans were previously eligible for a pause or forbearance – can alter your financial plans. Taking advantage of the student loan interest deduction as well as other educational credits and deductions can at least help to decrease your taxable income at tax time.