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Student Loan Interest Deduction

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📊 Step-by-Step Guide

Step 1: Confirm the 60-month limit no longer applies

The 60-month limit on interest payments no longer applies.

Step 2: Check all 4 eligibility conditions

1. You paid interest during the year on a qualified student loan (for yourself, your spouse, or anyone who was a dependent when the loan was taken out).
2. Your filing status is NOT married filing separately.
3. Your modified AGI is less than*:

• $75,000 if single, head of household, or qualifying widow(er)
• $155,000 if married filing jointly

Use lines 2-4 of the worksheet on page 31 of the IRS 1040 instruction book to figure your modified AGI.

4. You are not claimed as a dependent on someone else’s tax return (for example, your parent’s).

Step 3: Reduce your expenses by certain benefits

You must reduce your expenses by the following benefits:

• Employer provided educational assistance benefits not included in box 1 of your W-2 forms
• Tax-free distributions from a Coverdell Education Savings Account (ESA)
• Tax-free distributions from a qualified tuition program
• U.S. savings bond interest excluded from income because it’s used to pay qualified education expenses
• The tax-free part of scholarships and fellowships
• Veterans’ educational assistance
• Any other nontaxable (tax-free) educational assistance payments (other than gifts or inheritances)

*These amounts are for the 2012 filing season—use the 1040 instructions for the correct tax year.

For more detail, see IRS Pub. 970: http://www.irs.gov/publications/p970/ar01.html.

Tags: federal,form