YOU CAN DEDUCT the interest charged on your education loans, just like you can deduct the interest on a mortgage and on margin loans. But as with these other loans, the tax break on education loans comes with limitations.
In 2020, you can only deduct up to $2,500 in interest on qualified education loans. Still, the tax savings could take some of the sting out of those student loans in the years after you graduate.
The ability to claim the deduction is subject to an income test. In 2020, the deduction phases out if your modified adjusted gross income is between $140,000 and $170,000 and you’re married filing jointly, or between $70,000 and $85,000 and you’re single or you file as head of household. You can’t claim the deduction if your tax-filing status is married filing separately.
Some good news: On your federal tax return, you can get the tax savings even if you don’t itemize your deductions on Schedule A and instead claim the standard deduction.
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