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Student Loan Interest Deduction

Student Loan interest Deduction is a nonrefundable deduction on qualified education interest loans for the costs of attendance. This includes payments of interest, which are due and paid after December 31, 1997 and covers the first 60 months/five years of interest payments on a loan. The amount deducted will be phased in over a five year period of time: the maximum deduction is $1,000 in 1998, $1,500 in 1999, $2,000, and $2,500 in 2001 and each year following.

Additional Student Loan Interest Deduction information:

  • The Student Loan must have been used to pay the costs of attendance at an eligible educational institution for a student enrolled at least half time in a program leading to a degree, certificate, or recognized credential.
  • Costs of attendance include tuition, fees, room, board, books, equipment, and other necessary items, such as transportation.
  • The student loan interest deduction is available for all educational loans: student, parent, federal and nonfederal loans made before August of 1997 when the tax cuts became law.
  • Interest is deductible for loans taken on the taxpayer's own education or dependent's education, but not for other benefactors or relatives.
  • To qualify for the maximum deduction a single filer must have an adjusted gross income less than $40,000 and joint filers less than $60,000. The deduction amount decreases as the filer's income increases and is phased out at income levels above $55,000 for single filers and above $75,000 for joint filers. The modified adjusted income limitations will be adjusted in 2002 for inflation.
  • The deduction is available regardless of whether the individual itemizes tax deductions. Taxpayers will be able to claim the deductions for the first time on their 1998 tax returns filed in 1999.

The above information is for informational purposes only and subject to change.

For more information visit: Hope Home Page - U.S. Department of Education