The student loan interest deduction can save borrowers hundreds of dollars on their taxes each year. However, there are income limits that can reduce or eliminate your ability to claim the deduction. This “phase out” of the deduction starts at a certain income level and eliminates eligibility completely at a higher income level.
Fortunately you can easily determine if your income falls in the phase out range using our handy student loan interest deduction phase out calculator. Just input a few pieces of information and you’ll see exactly how the phase out impacts your potential deduction.
An Overview of the Student Loan Interest Deduction Phase Out
Before using the calculator, it helps to understand the basics of how the phase out works.
The phase out levels for 2023 taxes are:
- Single, head of household, or qualifying widow(er) filers:
- Phase out begins at $75,000 modified adjusted gross income (MAGI)
- Phase out complete at $90,000 MAGI
- Married filing jointly:
- Phase out begins at $155,000 MAGI
- Phase out complete at $185,000 MAGI
For example, let’s say you’re a single filer who paid $2,500 in student loan interest in 2022. If your MAGI is $70,000, you can deduct the full $2,500.
However, if your MAGI is $80,000, you’re in the phase out range The closer your income gets to $90,000, the less of the $2,500 deduction you can claim Once your MAGI hits $90,000, your deduction is reduced to $0.
Married filing jointly filers have higher phase out thresholds. So if you paid that same $2,500 in interest but file jointly and have a MAGI of $160,000, your deduction will be partially phased out. And it disappears completely once your MAGI reaches $185,000.
The phase out reduces your deduction incrementally in proportion to how far over the initial threshold you are. Our calculator makes determining this easy.
How to Use Our Student Loan Interest Deduction Phase Out Calculator
Our calculator only requires a few inputs:
- Your filing status
- Your MAGI
- Your total student loan interest paid
With this information, the calculator will determine what income range you fall into and calculate your deduction accordingly.
For example, let’s say you’re a single filer who paid $2,300 in student loan interest last year. Here’s how to use the calculator:
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Select your filing status: Single
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Input your MAGI: $80,000
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Enter your total interest paid: $2,300
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Hit “Calculate”
The calculator will automatically account for the fact you’re in the phase out range as a single filer with a MAGI of $80,000. Based on the $5,000 difference between the phase out beginning and end, it will calculate that you can deduct 40% of the maximum $2,500.
Your final deduction amount is displayed: $1,000.
That’s all there is to it! The calculator does the phase out math automatically.
Just keep in mind this deduction calculator is based on 2023 tax year rules. The phase outs will be adjusted for inflation in 2024. But the calculator can give you an estimated deduction for next year when you file your 2024 taxes as well.
Benefits of Our Student Loan Interest Deduction Calculator
Our calculator provides several benefits:
1. Saves you time and effort: No need to determine the phase out percentage manually or crunch any numbers yourself. Just input your information and get the results.
2. Provides an estimate of your potential savings: See exactly how much this deduction could be worth to you based on your specific situation.
3. Optimizes your deduction: Since it accounts for the phase out, you can get the maximum deduction you qualify for.
4. Easy to use: Our calculator is simple and intuitive. Just a few quick entries can give you the information you need.
5. Mobile-friendly: The calculator works great on mobile devices, so you can use it on your smartphone or tablet.
6. Updates automatically: As phase out thresholds change each year, the calculator updates to the latest amounts. No need to check annually yourself.
Student Loan Interest Deduction Phase Out Examples
Here are a few examples of how the phase out calculator works for different situations:
- Single filer, $80,000 MAGI, $2,200 interest paid: $880 deduction
- Single filer, $85,000 MAGI, $1,800 interest paid: $360 deduction
- Married filing jointly, $170,000 MAGI, $2,000 interest paid: $1,000 deduction
- Married filing jointly, $180,000 MAGI, $2,500 interest paid: $250 deduction
As you can see, the calculator adjusts the deduction precisely based on your income and filing status.
Who Can Claim the Student Loan Interest Deduction
While our calculator determines your phase out, it helps to understand the other requirements to claim the deduction in the first place:
- Your student loans must be in your name or your spouse’s name if filing jointly.
- The loans must have been used for higher education expenses for you, your spouse, or your dependents.
- You cannot be claimed as a dependent on someone else’s tax return.
- If married, you must file jointly to claim the deduction. It is not available to married couples who file separately.
- You do not need to itemize to claim this deduction.
Both federal and private student loans qualify. Make sure to get Form 1098-E from your servicer, as this shows the interest paid.
Don’t Forget State Tax Benefits
The student loan interest deduction reduces your federal AGI. But it can also lower your state taxable income in many states.
This means you may qualify for additional state tax savings beyond the federal benefit. Our calculator doesn’t account for state taxes, but this can provide a nice extra deduction in many cases.
Next Steps After Using Our Calculator
Once you have an estimate from our calculator, here are some next steps:
- If you qualify for a decent deduction, make sure to claim it when filing your taxes.
- Compare your estimated deduction to last year’s amount. Is it higher or lower?
- Determine if you can adjust your income to maximize the deduction.
- See if you can make an extra student loan payment by December 31st to increase interest paid.
- Consult a tax professional to confirm your deduction amount.
Getting every tax deduction you qualify for is key to minimizing your student loan burden. Our calculator makes it easy to determine your eligibility for the student loan interest deduction and calculate how much you can claim.
So if you paid student loan interest last year, be sure to use our tool. It only takes a minute to potentially uncover hundreds in savings.
Frequency of entities:
student loan interest deduction: 20
phase out: 11
calculator: 14
deduction: 22
interest: 16
income: 10
loan: 12
filing: 8
single: 5
married: 7
jointly: 5
magi: 7
Understanding the Impact of Student Loans on Income Taxes
Do you have student loan debt? If you do, youre not alone. The currently student loan debt is a staggering $1.4 trillion, and this amount is spread over 44 million borrowers. This amounts to roughly 70% of all college students, and this number is continuing to grow as students try to afford the ever increasing cost of their tuition. This article will go over how to get tax deductions on your student loans, along with the relative cost of the different schools. We will also talk about refinancing options that are available.
Can You Combine Other Loans into Your Student Loans During Refinancing?
If you have Federal loans, you can combine them with private loans during the refinancing process. However, if you choose to do this, you will lose any benefits that came with the Federal loan like income-driven repayment plans. You can also choose to combine your loans with your mortgage. By doing this, you would be refinancing your mortgage with a new loan or additional home equity. You would use this money to pay off any student loan debt that you have left.
- Deduction. Your mortgage payment and your student loans are both tax deductible. However, you may not qualify to deduct your student loan payments each year. You will have no problem qualifying and deducting your new mortgage payment on your taxes.
- Lower Interest Rate. The interest rate on a 15-year fixed mortgage is right around 3.32%, and your student loan interest rate is around 4.29%.
- Reduce the Number of Monthly Payments. Your two biggest payments each month are usually your mortgage and your student loans. This process combines them both into one payment.
- Give up Your Flexibility. Student loans have multiple payment plan options like the income-based repayment. There is also the option to defer payments if you lose your job or get hit with hardship. Your mortgage doesnt have this, and youll be expected to make your payments each month.
- Higher Risk. If you default on your loans, the worse that can happen is youll get your wages garnished. If you default on your mortgage, you can lose your home, so youre risking more by choosing to refinance.
- Pay More Interest. Most student loans come with a ten-year repayment plan. A mortgage can be extended out to 20, 25, and 30 years so youll end up paying more in interest before it is paid off.
How to Deduct Student Loan Interest to Save On Taxes
FAQ
How to calculate phase out for student loan interest?
What is the student loan interest phase out for 2024?
What is the phaseout for student loan interest deduction?
How to calculate the student loan interest deduction?
What is a phased out student loan interest deduction?
The amount of your student loan interest deduction is phased out (gradually reduced) if your MAGI is between $75,000 and $90,000 ($155,000 and $185,000 if you file a joint return). You can’t claim a student loan interest deduction if your MAGI is $90,000 or more ($185,000 or more if you file a joint return).
How much is a student loan interest deduction in 2023?
For the 2023 tax year, the amount of your student loan interest deduction is gradually reduced or phased out if your modified adjusted gross income (MAGI) is between $75,000 and $90,000 for single taxpayers. It’s between $155,000 and $185,000 for those who file married and jointly.
How much student loan interest can I deduct?
Assuming you meet all the requirements to receive the student loan interest tax deduction, you can deduct up to $2,500 in qualifying interest payments within the tax year. Can student loan interest be deducted for tax year 2023?
Do you offer a student loan tax deduction calculator?
We also offer student loan tax deduction calculators for 2018, 2019, & 2022. Important: If you are trying to estimate your figures for taxes due in April of 2023 (or October of 2023 for filers who are filing an extension), please use our 2022 calculator. * indicates required. If you are married, you are able to file a joint return with your spouse.