Since its inception in 1997, the student loan interest deduction has provided financial relief to borrowers repaying their education loans. In 2024, this deduction allows taxpayers to subtract up to $2,500 from their taxable income for interest paid on qualifying student loans. However, the benefit's future remains uncertain amidst ongoing discussions about potential federal budget adjustments.
The student loan interest deduction applies to qualifying loans, although specific qualifying criteria are not detailed here. Taxpayers who paid at least $600 in student loan interest in 2024 should receive a 1098-E form from their loan servicer, which reports the interest amount to the Internal Revenue Service (IRS). This form is essential for determining eligibility and calculating the deductible amount using an IRS-provided worksheet.
Eligibility for the full deduction depends on the taxpayer's modified adjusted gross income (MAGI). For single filers, those with a MAGI between $80,000 and $95,000 will see a phased reduction in the maximum deduction amount. Married couples filing jointly will experience similar reductions with MAGI ranging from $165,000 to $195,000. The IRS worksheet assists taxpayers in understanding how these income thresholds impact their deduction.
Despite the benefits it offers, the student loan interest deduction faces possible elimination under President Donald Trump's administration. This move could save the federal government an estimated $30 billion over a decade. Such savings could potentially fund reforms proposed by the Ways and Means Committee targeting Medicare and the Affordable Care Act, aiming to generate additional revenue.