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Deduction for Student Loan Interest

A deduction toward adjusted gross income (AGI) is allowed for interest paid on a higher education student loan for the taxpayer, taxpayer’s spouse or any dependent of the taxpayer as of the date the indebtedness was incurred. The deduction is limited to $2,500. The loan cannot have been obtained from a related party. For 2008, the deduction is phased out for modified AGI beginning at $55,000 for a single return and $115,000 for a joint return. The deduction is completely phased out at $70,000 for a single return and $145,000 on a joint return. The interest deduction is phased out ratably for income between these amounts.

A qualified education loan must have been incurred solely to pay for qualified higher education expenses. Qualified higher education expenses are defined under Section 472 of the Higher Education Act of 1965. This generally includes tuition and fees normally assessed, an allowance for room and board, books, supplies, transportation and other miscellaneous expenses of the student.

Please note that this deduction is not allowed for a taxpayer who is eligible to be claimed as a dependent by another person (whether or not actually claimed).

For more information, contact Mike Calahan at 312-980-2996 or Tara Wells at 312-980-3277.

This publication is part of Blackman Kallick’s marketing of professional services, and is not written tax advice directed at the specific facts and circumstances of any person and/or entity. Contents of this publication are of a general nature, and you should not act on this information without obtaining professional advice from your business advisor that is appropriately tailored to your individual needs and circumstances. This written advice is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.