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Categories: General Tax Terms

Student Loan Interest Deduction

The Student Loan Interest Deduction is a tax benefit that allows eligible taxpayers to deduct the interest paid on qualified student loans from their taxable income. This deduction can reduce the amount of income subject to federal tax, thereby lowering the overall tax liability.

To qualify for the deduction, the taxpayer must meet certain criteria, including having an adjusted gross income (AGI) within specific limits. For the tax year 2023, the maximum deduction is $2,500, and the student loan must have been taken out solely for the purpose of paying for qualified education expenses.

For example, if a taxpayer paid $1,000 in interest on a qualified student loan during the year and their AGI is within the allowable limits, they can deduct the entire $1,000, effectively reducing their taxable income by that amount.

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