Q:

How can you claim student loan interest on your income tax return?

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Quick Answer

Taxpayers are able to claim student loan interest on income tax returns by deducting it as an adjustment to income, reports the IRS. The IRS sets annual limits on the amount of interest that a qualifying taxpayer can claim in his modified adjusted gross income.

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Full Answer

As of 2015, lenders send forms 1098-E, Student Loan Interest Statements, to all borrowers who pay more than $600 interest on student loans, according to Forbes. The forms report the precise amount of interest the lender received from the borrower. The borrower reports the amount of the deduction on line 33 of form 1040, but is only allowed to claim a maximum of $2,500 in student loan interest each year. If a taxpayer's modified adjusted gross income is within the phase-out range, he can claim a lesser amount of interest as a deduction, but if his income is above the maximum allowed amount, he cannot claim the deduction. The phase-out range for a single taxpayer in 2015 is $65,000 to $80,000.

Borrowers who are claimed as dependents on another taxpayer's return or who report as married filing separately do not qualify for the student loan interest deduction, reports the IRS. To qualify, the loan must be used exclusively for educational expenses such as tuition, books, fees, supplies, and room and board, according to Forbes.

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