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Irs gov freefile Index A Assessment of tax, Assessment of tax. Irs gov freefile Assistance (see Tax help) B Bankruptcy Code tax compliance, Bankruptcy Code Tax Compliance Requirements Returns due after filing, Tax Returns Due After the Bankruptcy Filing Returns due before chapter 13 filing, Tax Returns Due for Periods Ending Before the Bankruptcy Filing in Chapter 13 Cases Bankruptcy estate, Taxes and the Bankruptcy Estate Attribute carryovers, Carrybacks from the debtor's activities. Irs gov freefile Carrybacks, Carrybacks from the debtor's activities. Irs gov freefile Disclosure of return information, Disclosure of bankruptcy estate's return information to debtor. Irs gov freefile Employer identification number, Employer identification number. Irs gov freefile , Employer identification number. Irs gov freefile Estimated tax, Estimated tax – Form 1041-ES. Irs gov freefile Return filing requirements, Bankruptcy Estate Tax Return Filing Requirements and Payment of Tax Due Separate taxable entity, Separate taxable entity. Irs gov freefile Transfer of assets, Transfer of assets between debtor and bankruptcy estate. Irs gov freefile C Conversion or dismissal chapter 11 case, Conversion or dismissal of chapter 11 cases. Irs gov freefile Corporations, Corporations Filing requirements, Corporations Tax-free reorganizations, Tax-Free Reorganizations D Debt cancellation, Debt Cancellation Bankruptcy exclusion, Bankruptcy case exclusion. Irs gov freefile Corporations, Corporations Insolvency exclusion, Insolvency exclusion. Irs gov freefile Partnerships, Partnerships S corporations, S Corporations Deductions and credits, Bankruptcy Estate Deductions and Credits Administrative expenses, Administrative expenses. Irs gov freefile Discharge of tax, Discharge of Unpaid Tax Disclosure of return information, Disclosure of debtor's return information to trustee. Irs gov freefile , Disclosure of return information to trustee. Irs gov freefile Dismissal of case Amended return, Dismissal of bankruptcy case. Irs gov freefile E Election to end tax year: Form 1040, Debtor's Election To End Tax Year – Form 1040 Annualizing taxable income, Annualizing taxable income. Irs gov freefile Election by spouse, Election by debtor's spouse. Irs gov freefile Filing requirements, Making the Election - Filing Requirements Short tax years, Short tax years. Irs gov freefile Employment taxes, Employment taxes. Irs gov freefile , Employment Taxes Examination of return, Examination of return. Irs gov freefile F Free tax services, How To Get Tax Help H Help (see Tax help) I Individuals in Chapter 12 or 13, Individuals in Chapter 12 or 13 Individuals in Chapter 7 or 11, Individuals in Chapter 7 or 11 Gross income chapter 11 case, Income of the estate in individual chapter 11 cases. Irs gov freefile Gross income chapter 7 case, Income of the estate in individual chapter 7 cases. Irs gov freefile J Jurisdiction over tax matters, Court Jurisdiction Over Tax Matters Bankruptcy Court, Bankruptcy Court Tax Court, Tax Court M More information (see Tax help) O Ordering tax return transcripts, Ordering tax transcripts and copies of returns. Irs gov freefile P Partnerships, filing requirements, Partnerships Payment of tax claim, Federal Tax Claims Eighth priority taxes, Unsecured Tax Claims Second, third, fourth priority taxes, Higher priority taxes. Irs gov freefile Secured tax claims, Secured tax claims. Irs gov freefile Penalties, Penalties. Irs gov freefile Relief from penalties, Relief from certain penalties. Irs gov freefile Publications (see Tax help) R Request for prompt tax determination, Prompt Determination Requests Request for refund, Requests for refund or credit S Statute of limitations collections, Statute of limitations for collection. Irs gov freefile T Tax attributes, Reduction of Tax Attributes Basis reduction, Basis. Irs gov freefile , Basis Reduction Carryovers, Attribute carryovers. Irs gov freefile Order of reduction, Order of reduction. Irs gov freefile Reduction of, Reduction of Tax Attributes Tax help, How To Get Tax Help Tax reporting chapter 11 cases, Tax Reporting – Chapter 11 Cases Employment tax returns, Tax Reporting – Chapter 11 Cases Information returns, Employment taxes and employer's obligation to file Form W-2 in individual chapter 11 cases. Irs gov freefile Self-employment taxes, Self-employment taxes in individual chapter 11 cases. Irs gov freefile Wage reporting, tax withholding, Employment taxes and employer's obligation to file Form W-2 in individual chapter 11 cases. Irs gov freefile Tax return: Form 1041, Figuring tax due. Irs gov freefile Figuring tax due, Filing Requirements Payment of tax due, Payment of Tax Due When to file, When to file. Irs gov freefile Taxpayer Advocate, Taxpayer Advocate Service. Irs gov freefile TTY/TDD information, How To Get Tax Help Prev  Up     Home   More Online Publications
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Irs gov freefile 4. Irs gov freefile   Student Loan Interest Deduction Table of Contents Introduction Student Loan Interest DefinedQualified Student Loan Qualified Education Expenses Include As Interest Do Not Include As Interest When Must Interest Be Paid Can You Claim the DeductionNo Double Benefit Allowed Figuring the DeductionEffect of the Amount of Your Income on the Amount of Your Deduction Which Worksheet To Use Claiming the Deduction Introduction Generally, personal interest you pay, other than certain mortgage interest, is not deductible on your tax return. Irs gov freefile However, if your modified adjusted gross income (MAGI) is less than $75,000 ($155,000 if filing a joint return) there is a special deduction allowed for paying interest on a student loan (also known as an education loan) used for higher education. Irs gov freefile For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return before subtracting any deduction for student loan interest. Irs gov freefile This deduction can reduce the amount of your income subject to tax by up to $2,500 in 2013. Irs gov freefile The student loan interest deduction is taken as an adjustment to income. Irs gov freefile This means you can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040). Irs gov freefile This chapter explains: What type of loan interest you can deduct, Whether you can claim the deduction, What expenses you must have paid with the student loan, Who is an eligible student, How to figure the deduction, and How to claim the deduction. Irs gov freefile Table 4-1. Irs gov freefile Student Loan Interest Deduction at a Glance This table summarizes the features of the student loan interest deduction. Irs gov freefile Do not rely on this table alone. Irs gov freefile Refer to the text for complete details. Irs gov freefile Feature   Description Maximum benefit   You can reduce your income subject to tax by up to $2,500. Irs gov freefile Loan qualifications   Your student loan: •must have been taken out solely to pay qualified education expenses, and •cannot be from a related person or made under a qualified employer plan. Irs gov freefile Student qualifications   The student must be: •you, your spouse, or your dependent, and  •enrolled at least half-time in a degree program. Irs gov freefile Time limit on deduction   You can deduct interest paid during the remaining period of your student loan. Irs gov freefile Limit on modified adjusted gross income (MAGI)   $155,000 if married filing a joint return; $75,000 if single, head of household, or qualifying widow(er). Irs gov freefile Student Loan Interest Defined Student loan interest is interest you paid during the year on a qualified student loan. Irs gov freefile It includes both required and voluntary interest payments. Irs gov freefile Qualified Student Loan This is a loan you took out solely to pay qualified education expenses (defined later) that were: For you, your spouse, or a person who was your dependent when you took out the loan, Paid or incurred within a reasonable period of time before or after you took out the loan, and For education provided during an academic period for an eligible student. Irs gov freefile Loans from the following sources are not qualified student loans. Irs gov freefile A related person. Irs gov freefile A qualified employer plan. Irs gov freefile Your dependent. Irs gov freefile   Generally, your dependent is someone who is either a: Qualifying child, or Qualifying relative. Irs gov freefile You can find more information about dependents in Publication 501. Irs gov freefile Exceptions. Irs gov freefile   For purposes of the student loan interest deduction, there are the following exceptions to the general rules for dependents. Irs gov freefile An individual can be your dependent even if you are the dependent of another taxpayer. Irs gov freefile An individual can be your dependent even if the individual files a joint return with a spouse. Irs gov freefile An individual can be your dependent even if the individual had gross income for the year that was equal to or more than the exemption amount for the year ($3,900 for 2013). Irs gov freefile Reasonable period of time. Irs gov freefile   Qualified education expenses are treated as paid or incurred within a reasonable period of time before or after you take out the loan if they are paid with the proceeds of student loans that are part of a federal postsecondary education loan program. Irs gov freefile   Even if not paid with the proceeds of that type of loan, the expenses are treated as paid or incurred within a reasonable period of time if both of the following requirements are met. Irs gov freefile The expenses relate to a specific academic period, and The loan proceeds are disbursed within a period that begins 90 days before the start of that academic period and ends 90 days after the end of that academic period. Irs gov freefile   If neither of the above situations applies, the reasonable period of time usually is determined based on all the relevant facts and circumstances. Irs gov freefile Academic period. Irs gov freefile   An academic period includes a semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution. Irs gov freefile In the case of an educational institution that uses credit hours or clock hours and does not have academic terms, each payment period can be treated as an academic period. Irs gov freefile Eligible student. Irs gov freefile   This is a student who was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential. Irs gov freefile Enrolled at least half-time. Irs gov freefile   A student was enrolled at least half-time if the student was taking at least half the normal full-time work load for his or her course of study. Irs gov freefile   The standard for what is half of the normal full-time work load is determined by each eligible educational institution. Irs gov freefile However, the standard may not be lower than any of those established by the U. Irs gov freefile S. Irs gov freefile Department of Education under the Higher Education Act of 1965. Irs gov freefile Related person. Irs gov freefile   You cannot deduct interest on a loan you get from a related person. Irs gov freefile Related persons include: Your spouse, Your brothers and sisters, Your half brothers and half sisters, Your ancestors (parents, grandparents, etc. Irs gov freefile ), Your lineal descendants (children, grandchildren, etc. Irs gov freefile ), and Certain corporations, partnerships, trusts, and exempt organizations. Irs gov freefile Qualified employer plan. Irs gov freefile   You cannot deduct interest on a loan made under a qualified employer plan or under a contract purchased under such a plan. Irs gov freefile Qualified Education Expenses For purposes of the student loan interest deduction, these expenses are the total costs of attending an eligible educational institution, including graduate school. Irs gov freefile They include amounts paid for the following items. Irs gov freefile Tuition and fees. Irs gov freefile Room and board. Irs gov freefile Books, supplies, and equipment. Irs gov freefile Other necessary expenses (such as transportation). Irs gov freefile The cost of room and board qualifies only to the extent that it is not more than the greater of: The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student, or The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. Irs gov freefile Eligible educational institution. Irs gov freefile   An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. Irs gov freefile S. Irs gov freefile Department of Education. Irs gov freefile It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Irs gov freefile   Certain educational institutions located outside the United States also participate in the U. Irs gov freefile S. Irs gov freefile Department of Education's Federal Student Aid (FSA) programs. Irs gov freefile   For purposes of the student loan interest deduction, an eligible educational institution also includes an institution conducting an internship or residency program leading to a degree or certificate from an institution of higher education, a hospital, or a health care facility that offers postgraduate training. Irs gov freefile   An educational institution must meet the above criteria only during the academic period(s) for which the student loan was incurred. Irs gov freefile The deductibility of interest on the loan is not affected by the institution's subsequent loss of eligibility. Irs gov freefile    The educational institution should be able to tell you if it is an eligible educational institution. Irs gov freefile Adjustments to Qualified Education Expenses You must reduce your qualified education expenses by the total amount paid for them with the following tax-free items. Irs gov freefile Employer-provided educational assistance. Irs gov freefile See chapter 11, Employer-Provided Educational Assistance . Irs gov freefile Tax-free distribution of earnings from a Coverdell education savings account (ESA). Irs gov freefile See Tax-Free Distributions in chapter 7, Coverdell Education Savings Account. Irs gov freefile Tax-free distribution of earnings from a qualified tuition program (QTP). Irs gov freefile See Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program. Irs gov freefile U. Irs gov freefile S. Irs gov freefile savings bond interest that you exclude from income because it is used to pay qualified education expenses. Irs gov freefile See chapter 10, Education Savings Bond Program . Irs gov freefile The tax-free part of scholarships and fellowships. Irs gov freefile See Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Irs gov freefile Veterans' educational assistance. Irs gov freefile See Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Irs gov freefile Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Irs gov freefile Include As Interest In addition to simple interest on the loan, if all other requirements are met, the items discussed below can be student loan interest. Irs gov freefile Loan origination fee. Irs gov freefile   In general, this is a one-time fee charged by the lender when a loan is made. Irs gov freefile To be deductible as interest, a loan origination fee must be for the use of money rather than for property or services (such as commitment fees or processing costs) provided by the lender. Irs gov freefile A loan origination fee treated as interest accrues over the term of the loan. Irs gov freefile   Loan origination fees were not required to be reported on Form 1098-E, Student Loan Interest Statement, for loans made before September 1, 2004. Irs gov freefile If loan origination fees are not included in the amount reported on your Form 1098-E, you can use any reasonable method to allocate the loan origination fees over the term of the loan. Irs gov freefile The method shown in the example below allocates equal portions of the loan origination fee to each payment required under the terms of the loan. Irs gov freefile A method that results in the double deduction of the same portion of a loan origination fee would not be reasonable. Irs gov freefile Example. Irs gov freefile In August 2004, Bill took out a student loan for $16,000 to pay the tuition for his senior year of college. Irs gov freefile The lender charged a 3% loan origination fee ($480) that was withheld from the funds Bill received. Irs gov freefile Bill began making payments on his student loan in 2013. Irs gov freefile Because the loan origination fee was not included in his 2013 Form 1098-E, Bill can use any reasonable method to allocate that fee over the term of the loan. Irs gov freefile Bill's loan is payable in 120 equal monthly payments. Irs gov freefile He allocates the $480 fee equally over the total number of payments ($480 ÷ 120 months = $4 per month). Irs gov freefile Bill made 7 payments in 2013, so he paid $28 ($4 × 7) of interest attributable to the loan origination fee. Irs gov freefile To determine his student loan interest deduction, he will add the $28 to the amount of other interest reported to him on Form 1098-E. Irs gov freefile Capitalized interest. Irs gov freefile   This is unpaid interest on a student loan that is added by the lender to the outstanding principal balance of the loan. Irs gov freefile Capitalized interest is treated as interest for tax purposes and is deductible as payments of principal are made on the loan. Irs gov freefile No deduction for capitalized interest is allowed in a year in which no loan payments were made. Irs gov freefile Interest on revolving lines of credit. Irs gov freefile   This interest, which includes interest on credit card debt, is student loan interest if the borrower uses the line of credit (credit card) only to pay qualified education expenses. Irs gov freefile See Qualified Education Expenses , earlier. Irs gov freefile Interest on refinanced student loans. Irs gov freefile   This includes interest on both: Consolidated loans—loans used to refinance more than one student loan of the same borrower, and Collapsed loans—two or more loans of the same borrower that are treated by both the lender and the borrower as one loan. Irs gov freefile    If you refinance a qualified student loan for more than your original loan and you use the additional amount for any purpose other than qualified education expenses, you cannot deduct any interest paid on the refinanced loan. Irs gov freefile Voluntary interest payments. Irs gov freefile   These are payments made on a qualified student loan during a period when interest payments are not required, such as when the borrower has been granted a deferment or the loan has not yet entered repayment status. Irs gov freefile Example. Irs gov freefile The payments on Roger's student loan were scheduled to begin in June 2012, 6 months after he graduated from college. Irs gov freefile He began making payments as required. Irs gov freefile In September 2013, Roger enrolled in graduate school on a full-time basis. Irs gov freefile He applied for and was granted deferment of his loan payments while in graduate school. Irs gov freefile Wanting to pay down his student loan as much as possible, he made loan payments in October and November 2013. Irs gov freefile Even though these were voluntary (not required) payments, Roger can deduct the interest paid in October and November. Irs gov freefile Allocating Payments Between Interest and Principal The allocation of payments between interest and principal for tax purposes might not be the same as the allocation shown on the Form 1098-E or other statement you receive from the lender or loan servicer. Irs gov freefile To make the allocation for tax purposes, a payment generally applies first to stated interest that remains unpaid as of the date the payment is due, second to any loan origination fees allocable to the payment, third to any capitalized interest that remains unpaid as of the date the payment is due, and fourth to the outstanding principal. Irs gov freefile Example. Irs gov freefile In August 2012, Peg took out a $10,000 student loan to pay the tuition for her senior year of college. Irs gov freefile The lender charged a 3% loan origination fee ($300) that was withheld from the funds Peg received. Irs gov freefile The interest (5% simple) on this loan accrued while she completed her senior year and for 6 months after she graduated. Irs gov freefile At the end of that period, the lender determined the amount to be repaid by capitalizing all accrued but unpaid interest ($625 interest accrued from August 2012 through October 2013) and adding it to the outstanding principal balance of the loan. Irs gov freefile The loan is payable over 60 months, with a payment of $200. Irs gov freefile 51 due on the first of each month, beginning November 2013. Irs gov freefile Peg did not receive a Form 1098-E for 2013 from her lender because the amount of interest she paid did not require the lender to issue an information return. Irs gov freefile However, she did receive an account statement from the lender that showed the following 2013 payments on her outstanding loan of $10,625 ($10,000 principal + $625 accrued but unpaid interest). Irs gov freefile Payment Date   Payment   Stated Interest   Principal November 2013   $200. Irs gov freefile 51   $44. Irs gov freefile 27   $156. Irs gov freefile 24 December 2013   $200. Irs gov freefile 51   $43. Irs gov freefile 62   $156. Irs gov freefile 89 Totals   $401. Irs gov freefile 02   $87. Irs gov freefile 89   $313. Irs gov freefile 13 To determine the amount of interest that could be deducted on the loan for 2013, Peg starts with the total amount of stated interest she paid, $87. Irs gov freefile 89. Irs gov freefile Next, she allocates the loan origination fee over the term of the loan ($300 ÷ 60 months = $5 per month). Irs gov freefile A total of $10 ($5 of each of the two principal payments) should be treated as interest for tax purposes. Irs gov freefile Peg then applies the unpaid capitalized interest ($625) to the two principal payments in the order in which they were made, and determines that the remaining amount of principal of both payments is treated as interest for tax purposes. Irs gov freefile Assuming that Peg qualifies to take the student loan interest deduction, she can deduct $401. Irs gov freefile 02 ($87. Irs gov freefile 89 + $10 + $303. Irs gov freefile 13). Irs gov freefile For 2014, Peg will continue to allocate $5 of the loan origination fee to the principal portion of each monthly payment she makes and treat that amount as interest for tax purposes. Irs gov freefile She also will apply the remaining amount of capitalized interest ($625 − $303. Irs gov freefile 13 = $321. Irs gov freefile 87) to the principal payments in the order in which they are made until the balance is zero, and treat those amounts as interest for tax purposes. Irs gov freefile Do Not Include As Interest You cannot claim a student loan interest deduction for any of the following items. Irs gov freefile Interest you paid on a loan if, under the terms of the loan, you are not legally obligated to make interest payments. Irs gov freefile Loan origination fees that are payments for property or services provided by the lender, such as commitment fees or processing costs. Irs gov freefile Interest you paid on a loan to the extent payments were made through your participation in the National Health Service Corps Loan Repayment Program (the “NHSC Loan Repayment Program”) or certain other loan repayment assistance programs. Irs gov freefile For more information, see Student Loan Repayment Assistance in chapter 5, Student Loan Cancellations and Repayment Assistance. Irs gov freefile When Must Interest Be Paid You can deduct all interest you paid during the year on your student loan, including voluntary payments, until the loan is paid off. Irs gov freefile Can You Claim the Deduction Generally, you can claim the deduction if all of the following requirements are met. Irs gov freefile Your filing status is any filing status except married filing separately. Irs gov freefile No one else is claiming an exemption for you on his or her tax return. Irs gov freefile You are legally obligated to pay interest on a qualified student loan. Irs gov freefile You paid interest on a qualified student loan. Irs gov freefile Claiming an exemption for you. Irs gov freefile   Another taxpayer is claiming an exemption for you if he or she lists your name and other required information on his or her Form 1040 (or Form 1040A), line 6c, or Form 1040NR, line 7c. Irs gov freefile Example 1. Irs gov freefile During 2013, Josh paid $600 interest on his qualified student loan. Irs gov freefile Only he is legally obligated to make the payments. Irs gov freefile No one claimed an exemption for Josh for 2013. Irs gov freefile Assuming all other requirements are met, Josh can deduct the $600 of interest he paid on his 2013 Form 1040 or 1040A. Irs gov freefile Example 2. Irs gov freefile During 2013, Jo paid $1,100 interest on her qualified student loan. Irs gov freefile Only she is legally obligated to make the payments. Irs gov freefile Jo's parents claimed an exemption for her on their 2013 tax return. Irs gov freefile In this case, neither Jo nor her parents may deduct the student loan interest Jo paid in 2013. Irs gov freefile Interest paid by others. Irs gov freefile   If you are the person legally obligated to make interest payments and someone else makes a payment of interest on your behalf, you are treated as receiving the payments from the other person and, in turn, paying the interest. Irs gov freefile Example 1. Irs gov freefile Darla obtained a qualified student loan to attend college. Irs gov freefile After Darla's graduation from college, she worked as an intern for a nonprofit organization. Irs gov freefile As part of the internship program, the nonprofit organization made an interest payment on behalf of Darla. Irs gov freefile This payment was treated as additional compensation and reported in box 1 of her Form W-2. Irs gov freefile Assuming all other qualifications are met, Darla can deduct this payment of interest on her tax return. Irs gov freefile Example 2. Irs gov freefile Ethan obtained a qualified student loan to attend college. Irs gov freefile After graduating from college, the first monthly payment on his loan was due in December. Irs gov freefile As a gift, Ethan's mother made this payment for him. Irs gov freefile No one is claiming a dependency exemption for Ethan on his or her tax return. Irs gov freefile Assuming all other qualifications are met, Ethan can deduct this payment of interest on his tax return. Irs gov freefile No Double Benefit Allowed You cannot deduct as interest on a student loan any amount that is an allowable deduction under any other provision of the tax law (for example, as home mortgage interest). Irs gov freefile Figuring the Deduction Your student loan interest deduction for 2013 is generally the smaller of: $2,500, or The interest you paid in 2013. Irs gov freefile However, the amount determined above may be gradually reduced (phased out) or eliminated based on your filing status and MAGI as explained below. Irs gov freefile You can use Worksheet 4-1. Irs gov freefile Student Loan Interest Deduction Worksheet (at the end of this chapter) to figure both your MAGI and your deduction. Irs gov freefile Form 1098-E. Irs gov freefile   To help you figure your student loan interest deduction, you should receive Form 1098-E. Irs gov freefile Generally, an institution (such as a bank or governmental agency) that received interest payments of $600 or more during 2013 on one or more qualified student loans must send Form 1098-E (or acceptable substitute) to each borrower by January 31, 2014. Irs gov freefile   For qualified student loans taken out before September 1, 2004, the institution is required to include on Form 1098-E only payments of stated interest. Irs gov freefile Other interest payments, such as certain loan origination fees and capitalized interest, may not appear on the form you receive. Irs gov freefile However, if you pay qualifying interest that is not included on Form 1098-E, you can also deduct those amounts. Irs gov freefile See Allocating Payments Between Interest and Principal , earlier. Irs gov freefile    The lender may ask for a completed Form W-9S, or similar statement to obtain the borrower's name, address, and taxpayer identification number. Irs gov freefile The form may also be used by the borrower to certify that the student loan was incurred solely to pay for qualified education expenses. Irs gov freefile Effect of the Amount of Your Income on the Amount of Your Deduction The amount of your student loan interest deduction is phased out (gradually reduced) if your MAGI is between $60,000 and $75,000 ($125,000 and $155,000 if you file a joint return). Irs gov freefile You cannot take a student loan interest deduction if your MAGI is $75,000 or more ($155,000 or more if you file a joint return). Irs gov freefile Modified adjusted gross income (MAGI). Irs gov freefile   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return before subtracting any deduction for student loan interest. Irs gov freefile However, as discussed below, there may be other modifications. Irs gov freefile Table 4-2 shows how the amount of your MAGI can affect your student loan interest deduction. Irs gov freefile Table 4-2. Irs gov freefile Effect of MAGI on Student Loan Interest Deduction IF your filing status is. Irs gov freefile . Irs gov freefile . Irs gov freefile AND your MAGI is. Irs gov freefile . Irs gov freefile . Irs gov freefile THEN your student loan interest deduction is. Irs gov freefile . Irs gov freefile . Irs gov freefile single,  head of household, or qualifying widow(er) not more than $60,000 not affected by the phaseout. Irs gov freefile more than $60,000  but less than $75,000 reduced because of the phaseout. Irs gov freefile $75,000 or more eliminated by the phaseout. Irs gov freefile married filing joint return not more than $125,000 not affected by the phaseout. Irs gov freefile more than $125,000 but less than $155,000 reduced because of the phaseout. Irs gov freefile $155,000 or more eliminated by the phaseout. Irs gov freefile MAGI when using Form 1040A. Irs gov freefile   If you file Form 1040A, your MAGI is the AGI on line 22 of that form figured without taking into account any amount on line 18 (student loan interest deduction) and line 19 (tuition and fees deduction). Irs gov freefile MAGI when using Form 1040. Irs gov freefile   If you file Form 1040, your MAGI is the AGI on line 38 of that form figured without taking into account any amount on line 33 (student loan interest deduction), line 34 (tuition and fees deduction), or line 35 (domestic production activities deduction), and modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, and Exclusion of income by bona fide residents of Puerto Rico. Irs gov freefile MAGI when using Form 1040NR. Irs gov freefile   If you file Form 1040NR, your MAGI is the AGI on line 36 of that form figured without taking into account any amount on line 33 (student loan interest deduction) and line 34 (domestic production activities deduction). Irs gov freefile MAGI when using Form 1040NR-EZ. Irs gov freefile   If you file Form 1040NR-EZ, your MAGI is the AGI on line 10 of that form figured without taking into account any amount on line 9 (student loan interest deduction). Irs gov freefile Phaseout. Irs gov freefile   If your MAGI is within the range of incomes where the credit must be reduced, you must figure your reduced deduction. Irs gov freefile To figure the phaseout, multiply your interest deduction (before the phaseout) by a fraction. Irs gov freefile The numerator is your MAGI minus $60,000 ($125,000 in the case of a joint return). Irs gov freefile The denominator is $15,000 ($30,000 in the case of a joint return). Irs gov freefile Subtract the result from your deduction (before the phaseout) to give you the amount you can deduct. Irs gov freefile Example 1. Irs gov freefile During 2013 you paid $800 interest on a qualified student loan. Irs gov freefile Your 2013 MAGI is $145,000 and you are filing a joint return. Irs gov freefile You must reduce your deduction by $533, figured as follows. Irs gov freefile   $800 × $145,000 − $125,000  $30,000 = $533   Your reduced student loan interest deduction is $267 ($800 − $533). Irs gov freefile Example 2. Irs gov freefile The facts are the same as in Example 1 except that you paid $2,750 interest. Irs gov freefile Your maximum deduction for 2013 is $2,500. Irs gov freefile You must reduce your maximum deduction by $1,667, figured as follows. Irs gov freefile   $2,500 × $145,000 − $125,000  $30,000 = $1,667   In this example, your reduced student loan interest deduction is $833 ($2,500 − $1,667). Irs gov freefile Which Worksheet To Use Generally, you figure the deduction using the Student Loan Interest Deduction Worksheet in the instructions for Form 1040, Form 1040A, or Form 1040NR. Irs gov freefile However, if you are filing Form 2555, Foreign Earned Income, Form 2555-EZ, Foreign Earned Income Exclusion, or Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa, or you are excluding income from sources within Puerto Rico, you must complete Worksheet 4-1. Irs gov freefile Student Loan Interest Deduction Worksheet at the end of this chapter. Irs gov freefile Claiming the Deduction The student loan interest deduction is an adjustment to income. Irs gov freefile To claim the deduction, enter the allowable amount on line 33 (Form 1040), line 18 (Form 1040A), line 33 (Form 1040NR), or line 9 (Form 1040NR-EZ). Irs gov freefile Worksheet 4-1. Irs gov freefile Student Loan Interest Deduction Worksheet Use this worksheet instead of the worksheet in the Form 1040 instructions if you are filing Form 2555, 2555-EZ, or 4563, or you are excluding income from sources within Puerto Rico. Irs gov freefile Before using this worksheet, you must complete Form 1040, lines 7 through 32, plus any amount to be entered on the dotted line next to line 36. Irs gov freefile 1. Irs gov freefile Enter the total interest you paid in 2013 on qualified student loans. Irs gov freefile Do not enter  more than $2,500 1. Irs gov freefile   2. Irs gov freefile Enter the amount from Form 1040, line 22 2. Irs gov freefile       3. Irs gov freefile Enter the total of the amounts from Form 1040,  lines 23 through 32 3. Irs gov freefile           4. Irs gov freefile Enter the total of any amounts entered on the dotted line next to Form 1040, line 36 4. Irs gov freefile           5. Irs gov freefile Add lines 3 and 4 5. Irs gov freefile       6. Irs gov freefile Subtract line 5 from line 2 6. Irs gov freefile       7. Irs gov freefile Enter any foreign earned income exclusion and/or housing  exclusion (Form 2555, line 45, or Form 2555-EZ, line 18) 7. Irs gov freefile       8. Irs gov freefile Enter any foreign housing deduction (Form 2555, line 50) 8. Irs gov freefile       9. Irs gov freefile Enter the amount of income from Puerto Rico you are excluding 9. Irs gov freefile       10. Irs gov freefile Enter the amount of income from American Samoa  you are excluding (Form 4563, line 15) 10. Irs gov freefile       11. Irs gov freefile Add lines 6 through 10. Irs gov freefile This is your modified adjusted gross income 11. Irs gov freefile   12. Irs gov freefile Enter the amount shown below for your filing status 12. Irs gov freefile     •Single, head of household, or qualifying widow(er)—$60,000       •Married filing jointly—$125,000     13. Irs gov freefile Is the amount on line 11 more than the amount on line 12?       □ No. Irs gov freefile Skip lines 13 and 14, enter -0- on line 15, and go to line 16. Irs gov freefile       □ Yes. Irs gov freefile Subtract line 12 from line 11 13. Irs gov freefile   14. Irs gov freefile Divide line 13 by $15,000 ($30,000 if married filing jointly). Irs gov freefile Enter the result as a decimal  (rounded to at least three places). Irs gov freefile If the result is 1. Irs gov freefile 000 or more, enter 1. Irs gov freefile 000 14. Irs gov freefile . Irs gov freefile 15. Irs gov freefile Multiply line 1 by line 14 15. Irs gov freefile   16. Irs gov freefile Student loan interest deduction. Irs gov freefile Subtract line 15 from line 1. Irs gov freefile Enter the result here  and on Form 1040, line 33. Irs gov freefile Do not include this amount in figuring any other  deduction on your return (such as on Schedule A, C, E, etc. Irs gov freefile ) 16. Irs gov freefile   Prev  Up  Next   Home   More Online Publications