Updated for filing 2021 tax returns
How do student loan interest payments lower my taxes owed?
Paying back your student loan won’t generate any tax breaks, but paying the interest on that student loan can, by reducing your income tax. The max deduction is $2,500 for your 2021 tax return. This max is per return, not per taxpayer, even if both spouses on a joint return qualify for the deduction.
Note: Since federal student loan interest was waived in 2021, the interest deduction will only apply to non-federal loans that continued to charge interest.
You must meet all of these requirements:
- You paid interest during the tax year on a qualified student loan.
- Your filing status is not married filing separately.
- Your modified adjusted gross income (MAGI) must be less than $70,000 if filing single, head of household, or qualifying widow(er) (the deduction phases out at $85,000). For married filing jointly, the MAGI must be less than $140,000, and the deduction phases out at $170,000.
- You are not claimed as a dependent on someone else’s return.
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Also see: Tax Breaks for Students and New Grads