How to Claim the Student Loan Deduction

by Alia Nikolakopulos, studioD

The IRS provides two methods to deduct educational expenses that originate from a student loan. The two deductions include the student loan interest deduction and the tuition and fees deduction. Interest you pay on your student loan is deductible in the year you pay the interest until the balance of your loan is paid. If you take out a student loan to pay for tuition or required fees for your own education, or the education of a spouse or child, you may deduct the amount of your expense that is paid for with your own money or student loan funds.

Student Loan Interest Deduction

Look at the Form 1098-E you receive at the end of the year or an account statement from the company you send loan payments to. The amount of interest you pay during the year is included on these documents.

Determine your adjusted gross income. If you earn less than $60,000 and are single, or earn less than $120,000 if you are married, you may deduct all the student loan interest you pay during the year, up to $2,500, as of publication. If you earn more than $75,000 if single, or more than $150,000 if married, you must complete a worksheet to determine the amount of student loan interest to deduct.

Report the amount of your student loan interest deduction on Form 1040, line 33 or Form 1040A, line 18.

Tuition and Fees Deduction

Look at Form 1098-T. This form is sent to you by the school you paid tuition to during the year. Box 1 contains the amount the school receives for your tuition and fees from all sources. Box 2 contains the amount the school billed you for tuition and fees. In some cases, one or both of the boxes may include payments or bills for the first quarter of the next school year. If Box 7 of Form 1098-E is checked, review the payment and billing information on the back of the form to determine the amount you paid in the current tax year. You may include payments you make during the year even if the payment is for future courses.

Look at Box 5 of Form 1098-T. This box includes grants and scholarships received during the year for your tuition and fees. Subtract the amount in Box 5 from the amount in Box 1. The result is the tuition and fee expense you may deduct

Determine your deduction. If you are single and earn less than $65,000, you may deduct up to $4,000 as of publication. If you are single and earn between $65,000 and $80,000, you may deduct up to $2,000 of your expense. If you are married and earn less than $130,000, you may deduct up to $4,000. If you are married and earn between $130,000 and $160,000, you may deduct up to $2,000 of expense.

Claim the deduction. Report your eligible deduction for tuition and fees on Form 1040, line 34 or Form 1040A, line 19.

About the Author

With a background in taxation and financial consulting, Alia Nikolakopulos has over a decade of experience resolving tax and finance issues. She is an IRS Enrolled Agent and has been a writer for these topics since 2010. Nikolakopulos is pursuing Bachelor of Science in accounting at the Metropolitan State University of Denver.

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