Your deduction for interest paid on qualified student loans, after the income phase-out
Updated October 2026
1. Take the interest you paid on qualified student loans during the year, up to $2,500 (Form 1098-E shows it). 2. If modified AGI is above the start of the phase-out range, divide the excess by the width of the range ($15,000, or $30,000 for a joint return) and round to three decimal places. 3. Multiply the deduction by that fraction and subtract.
Worked example (2026). Single, MAGI $90,000, $3,000 of interest. The deduction starts at $2,500. ($90,000 − $85,000) ÷ $15,000 = 0.333; $2,500 × 0.333 = $832.50; $2,500 − $832.50 = $1,667.50. At a 22% marginal rate it saves $366.85.
Publication 970’s own examples (2025 range). A joint filer with $185,000 of MAGI who paid $800 of interest reduces it by $800 × $15,000 ÷ $30,000 = $400, leaving $400. With $2,750 of interest the maximum $2,500 is reduced by $1,250, leaving $1,250. Choose tax year 2025 to reproduce them.
| Filing status | Full deduction if MAGI is | Reduced between | None at or above |
|---|---|---|---|
| Single, head of household, qualifying surviving spouse | $85,000 or less | $85,000–$100,000 | $100,000 |
| Married filing jointly | $175,000 or less | $175,000–$205,000 | $205,000 |
| Married filing separately | Not allowed | ||
The 2026 amounts are from Revenue Procedure 2025-32, section 4.29. For 2025 the joint range was $170,000 to $200,000. You must be legally obligated on the loan, not be claimable as someone else’s dependent, and the loan must have been taken out only to pay qualified higher education expenses for you, your spouse or a dependent.
For most people MAGI is AGI before the student loan interest deduction. Add back any foreign earned income or housing exclusion and certain territory exclusions. Deductible interest includes capitalized interest and loan origination fees spread over the loan, as long as you are the one legally obligated. Payments someone else makes on your loan count as yours if no one claims you as a dependent.
| Borrower (2026) | Deduction | Federal tax saved |
|---|---|---|
| Single, MAGI $60,000, $1,800 of interest | $1,800.00 | $216.00 |
| Single, MAGI $90,000, $3,000 of interest | $1,667.50 | $366.85 |
| Single, MAGI $98,000, $3,000 of interest | $332.50 | $73.15 |
| Married filing jointly, MAGI $150,000, $4,000 of interest | $2,500.00 | $550.00 |
| Married filing jointly, MAGI $190,000, $2,500 of interest | $1,250.00 | $275.00 |
| Married filing separately, any income | $0.00 | $0.00 |
The deduction is an adjustment to income on Schedule 1, so it counts even with the standard deduction. Its value is the deduction times your marginal rate.
State deductions, loans from relatives or employer plans (which do not qualify), interest on loans refinanced together with non-education debt, and the employer student loan repayment exclusion under section 127 (up to $5,250 a year tax-free, now permanent). Interest paid by an employer under section 127 cannot also be deducted.
Filing separately to lower an income-driven payment and losing this deduction. Deducting a child’s loan interest as a parent when only the child is legally obligated. Using AGI after the deduction as MAGI. Forgetting interest under $600: lenders need not send a 1098-E below that, but the interest still counts. Double-dipping with 529 money or employer-paid interest.