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For student loan borrowers, tax season's creeping up, and if you're wondering how much you can shave off your 2025 taxes with the student loan interest deduction, you're in the right spot. This handy tax break lets you deduct up to $2,500 of the interest you paid on qualified student loans, but there's a catch: income limits.
First off, the basics: you can deduct the lesser of $2,500 or the actual interest you paid on federal or private student loans used for higher education. The IRS says it's an "above-the-line" deduction, meaning you don't need to itemize-just pop it on your Form 1040, Schedule 1. Sweet deal, right? But here's where income comes in.
Your Modified Adjusted Gross Income (MAGI) decides how much-or if-you can deduct. For 2025, the limits are adjusted for inflation, and they're looking like $85,000 to $100,000 for single filers and $170,000 to $200,000 for married filing tly, based on trends from past years like 2024's $80,000-$95,000 single range.
So, how does it work? If your MAGI is below $85,000 (or $170,000 t), you're golden-you can claim the full $2,500 (or your paid interest, if less). Cross into that phaseout zone-say, $90,000 as a single filer-and your deduction shrinks.
Can you deduct Student Loan Interest in 2025?
The IRS has a worksheet to crunch the numbers, but think of it like this: the higher your income in that range, the less you get. Hit $100,000 ($200,000 t), and poof-no deduction for you. "The deduction is gradually reduced and eventually eliminated by phaseout when your MAGI reaches the annual limit," the IRS explains in Topic No. 456. Clear as mud? Basically, it's a sliding scale.
Who qualifies? You need to be legally on the hook for the loan, not filing married separately, and not claimed as a dependent. Paid $600 or more in interest? Your lender should send a Form 1098-E. Less than that? Check your loan portal-it's still deductible if you qualify. Oh, and if your boss chipped in tax-free payments (thanks, American Rescue Plan, good through 2025), that part doesn't count. With the income cap creeping up each year, 2025's limits give a bit more wiggle room than 2024's.