Student Loan Interest Deduction
Definition of 'Student Loan Interest Deduction'
A tax deduction for interest paid on higher education loans during the tax year in the U.S., the deduction amount being the lesser of $2,500 or the actual interest paid. The student loan interest deduction can be claimed by the taxpayer if the student loan was taken out solely to pay qualified education expenses; the loan cannot be from a related person or made under a qualified employer plan.
In addition, the IRS stipulates that the student must be the taxpayer, spouse or dependent, and should be enrolled at least half-time in a degree program. Moreover, the deduction is limited by the taxpayer's income; student loan interest cannot be deducted if the taxpayer's gross income exceeds $75,000 or $150,000 if filing a joint tax return with the spouse.
Investopedia explains 'Student Loan Interest Deduction'
As the student loan interest deduction is claimed as an adjustment to income, it is not necessary to itemize the deduction on Schedule A of Form 1040. The amount of interest paid in a given tax year can be found on Form 1098-E, which is furnished by the lender to the borrower.
In Canada, taxpayers can claim interest paid on student loans as a tax credit, subject to certain conditions. A Canadian taxpayer may be eligible to claim interest paid on a student loan in a given year or the preceding five years for post-secondary education, if the loan was received under the Canada Student Loans Act, the Canada Student Financial Assistance Act, or similar provincial or territorial government laws.