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The student loan interest deduction allows eligible borrowers to deduct up to $2,500 in student loan interest from their taxable income, potentially lowering their tax bill for 2024. Prior to the COVID-19 pandemic, nearly 13 million taxpayers utilized this deduction. However, during the pandemic from March 2020 to October 2023, many borrowers could not claim this deduction as interest accrued on federal student loans was temporarily set to zero. With the resumption of interest accrual in September 2023 and the first payments after the pause due in October, borrowers can once again claim deductions for their interest payments made throughout the year.
This deduction is considered “above the line,” meaning it doesn’t require itemizing to be claimed. Borrowers can find their interest payments reported on IRS form 1098-E, provided by their lenders. Depending on their tax bracket, the deduction could be worth up to $550. Income limits apply: for individuals, the deduction begins to phase out at a modified adjusted gross income of $80,000; for married couples filing jointly, the phase-out starts at $165,000. Those with MAGIs of $95,000 and $195,000, respectively, are not eligible for the deduction.
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