The $2,500 Student Loan Interest Deduction Disappears Entirely at $100K MAGI

A deduction that quietly disappears as income grows

We ran the calculator at three income points for a single filer paying $2,500 or more in student loan interest: at $60,000 MAGI, the full $2,500 deduction applies, worth $550 at a 22% marginal rate. At $92,500 MAGI — the midpoint of the phase-out window — only half survives: a $1,250 deduction. At $100,000 MAGI, the deduction is fully gone, even though nothing about the loan or the interest paid changed. A raise that pushes MAGI past the threshold can cost more in a lost deduction than the raise itself delivers in the phase-out range.

The married-filing-separately rule surprises people the most: it's not a phase-out, it's a flat "no" regardless of income. A couple who could each individually qualify loses the deduction entirely the moment they file separately — one of several reasons MFS is a specifically bad default for couples with student debt.

How the math works

Capped interest = min(interest paid, $2,500). Phase-out fraction = clamp((MAGI − phase-out start) ÷ phase-out window, 0, 1). Deductible amount = capped interest × (1 − phase-out fraction). 2025 windows: single/HoH $85,000-$100,000 ($15,000 window), married filing jointly $170,000-$200,000 ($30,000 window). Married filing separately: ineligible at any income.

Source: IRS Publication 970 (Tax Benefits for Education), 2025 figures; IRC §221.

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Where this calculation doesn't apply

• You can be claimed as a dependent.The deduction belongs to whoever is legally obligated on the loan and not claimed as someone else's dependent — a parent paying a dependent child's loan interest generally can't claim it, and neither can the dependent.
• The loan isn't in your name.Only interest on a loan you're legally obligated to repay counts — co-signing doesn't automatically create eligibility if you're not the primary obligor making the payments.
• MAGI has education-specific add-backs.For most filers MAGI here is close to AGI before this deduction, but specific add-backs (foreign earned income exclusion, foreign housing exclusion) can apply to some filers — check the Publication 970 worksheet if any apply to you.
• You paid under $600 in interest.Loan servicers aren't required to issue a Form 1098-E below $600, though you can still claim the deduction for actual interest paid if you have your own records.

What to actually do

1. Pull your actual student loan interest paid from Form 1098-E, issued by your loan servicer (or your own records if under $600).
2. Check your actual MAGI against the 2025 phase-out window for your filing status before assuming the full $2,500 applies.
3. If married, run the numbers both jointly and separately before defaulting to separate filing — the flat MFS ineligibility often outweighs whatever else separate filing might save.
4. Remember this is an above-the-line deduction — you get it even if you take the standard deduction, no itemizing required.
5. If close to a phase-out threshold, consider whether pre-tax retirement contributions (which lower MAGI) could preserve more of the deduction.