A way to lessen your student loans.
You may be able to deduct up to $2,500 of the interest you paid on student loans on your federal individual income tax return. The deduction is not limited to government-sponsored loans, but does not apply to loans made to students by family members. The Tax Relief Act of 2010 extended the student loan deduction through 2012. After 2012, the deduction will revert to a previous tax law in which interest on a student loan is deductible only for the first 60-months of repayment.
The amount of your student loan interest deduction will be phased out if your modified adjusted gross income is between $55,000 and $70,000 ($110,000 and $140,000 if you file a joint return). You will not be able to take a student loan interest deduction if your modified adjusted gross income is $70,000 or more ($140,000 or more if you file a joint return).
You are eligible to take the interest deduction if you paid interest on a student loan for you, your spouse, or a person who was your dependent. An eligible student is a student who was enrolled at least half-time in a program that led to a degree, certificate, or other recognized educational credential.
Qualified expenditures are the total cost of attending an eligible educational institution, including graduate school, including tuition and fees, room and board, books, supplies, and equipment, and other necessary expenses such as transportation. You must reduce the qualified expenses by the amount of any tax-free educational assistance you received.
Eligible Educational Institutions
Eligible educational institutions are any college, university, vocational school, or other postsecondary educational institution eligible to participate in student aid programs administered by the United States Department of Education.
For additional information on the Student Loan Interest Deduction, see Internal Revenue Service Publication 970.