Tax season is coming up, and if you’re paying off student loans, there’s good news—you might be able to deduct up to $2,500 of the interest you paid in 2025. But before you start celebrating, there are income limits that determine if you qualify for the full deduction, a partial deduction, or none at all. Let’s break it all down.
Basics
The student loan interest deduction allows you to deduct up to $2,500 or the actual amount of interest you paid on federal or private student loans used for higher education—whichever is lower.
The best part? It’s an “above-the-line” deduction, meaning you don’t need to itemize. You simply enter it on Form 1040, Schedule 1, reducing your taxable income directly.
Income
Your eligibility for this deduction depends on your Modified Adjusted Gross Income (MAGI). The 2025 income limits have been adjusted for inflation, following trends from previous years.
Here’s what the limits are expected to be:
| Filing Status | Full Deduction (MAGI Below) | Phaseout Range | No Deduction (MAGI Above) |
|---|---|---|---|
| Single | Below $85,000 | $85,000 – $100,000 | Above $100,000 |
| Married Filing Jointly | Below $170,000 | $170,000 – $200,000 | Above $200,000 |
If your MAGI is below the threshold, you can claim the full $2,500 (or the interest you paid if it’s less). If you’re in the phaseout range, the deduction gradually decreases. And if your MAGI exceeds the upper limit, you can’t claim the deduction at all.
Calculation
The IRS provides a worksheet to determine the exact amount you can deduct, but here’s the simple version:
- Under $85,000 ($170,000 for joint filers)? Full deduction.
- In the phaseout range? Your deduction gets smaller as income rises.
- Above $100,000 ($200,000 for joint filers)? No deduction.
Eligibility
To qualify for the deduction, you must meet the following criteria:
- The loan must be in your name (not your parents’ or someone else’s).
- You must not be claimed as a dependent on someone else’s tax return.
- You cannot file as “married filing separately”.
- You must have paid interest on a qualified student loan in 2025.
If you paid $600 or more in student loan interest, your loan servicer should send you Form 1098-E. If it’s less, you can still claim the deduction, but you’ll need to check your loan statements.
Employer Contributions
One more thing—if your employer helped pay your student loans tax-free under the American Rescue Plan (extended through 2025), that amount isn’t deductible. So, if your employer contributed $1,000, you can’t deduct that portion.
If your income is within the 2025 phaseout limits, this tax break could save you hundreds of dollars. While the deduction isn’t as good as outright loan forgiveness, every little bit helps when you’re paying off student debt.
FAQs
What is the student loan interest deduction for 2025?
You can deduct up to $2,500 in student loan interest if you qualify.
What are the 2025 income limits for the deduction?
Single filers: $85,000-$100,000. Married filing jointly: $170,000-$200,000.
Do I need to itemize to claim the deduction?
No, it’s an above-the-line deduction, so you don’t need to itemize.
Can I deduct interest if my employer paid my loan?
No, any tax-free employer payments do not qualify for the deduction.
Where do I report student loan interest on my taxes?
Report it on Form 1040, Schedule 1, as an adjustment to income.
