05 Apr Can I deduct my student loan interest?
Q. I recently decided to pay off my $39,000 student loan, and it had $13,000 of capitalized interest. Can I deduct the interest?
— Looking for savings
A. It’s not that simple.
The deduction is limited to $2,500 per year, subject to a phase-out based on income, no matter how much is paid and whether the interest was accrued from prior tax years, said Steven Holt, an attorney and chair of the taxation, trusts and estates department at Mandelbaum Salsburg in Roseland.
“For a single taxpayer, the phase-out is applicable to taxpayers with modified adjusted gross income of more than $65,000, with a complete phase-out — $0 deduction — if MAGI is $80,000 or more,” Holt said. “The phase-out range for married taxpayers filing jointly is from $135,000 to $165,000.”
Holt said the IRS has an excellent interactive tool for helping taxpayers determine whether the deduction is available and how to calculate it. You can find that here.
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