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Will the interest on my student loan be deductible in computing my federal income taxes?

If you meet certain requirements, you can deduct up to $2,500 of student loan interest in in a year—even if you don’t itemize. The loan doesn’t have to be a federal student loan, but it can’t be a loan from a relative, or from a related entity (such as a corporation you control), or from your 401k account. It has to be a debt incurred to pay qualified higher education expenses for you, your spouse, or someone who was your dependent at the time you took out the loan. Qualified education expenses include tuition, fees, books, equipment, and other necessary expenses, such as transportation, for a student attending at least half-time and enrolled in a program leading to a degree, certificate, or similar credential. Qualified expenses are reduced to the extent that you take advantage of certain other education tax benefits. You can’t claim the deduction if you’re a dependent, or if you’re married filing separately.

The deduction is fully allowed for singles with modified adjusted gross income (“MAGI”) below $60,000 and partly allowed for singles with MAGI up to $75,000. Married couples filing jointly get the full deduction with MAGI up to $120,000 and a partial deduction with MAGI up to $150,000. MAGI is your income after certain adjustments (such as IRA contributions and alimony payments) but before claiming exemptions, the standard deduction, or itemized deductions. For most people, modified adjusted gross income is the same as AGI (not counting the deduction for student loan interest or for qualified tuition and related expenses), but AGI must be increased if you take advantage of certain exclusions for income earned abroad.