Qualifying for certain tax credits and deductions will reduce your federal tax bill and might even bring you a refund. The Internal Revenue Service offers many tax-saving rewards to taxpayers who attend college, including the education credits and the student loan interest deduction. If you receive Form 1098-E at the end of the tax year, you might qualify for a deduction on the interest you paid on your student loan. Form 1098-E is used by lenders, government agencies, and colleges to report student loan payments to the IRS.
Complete the “Filing Status,” “Exemptions” and “Income” sections of your individual income tax return. To claim student loan interest, you must use either Form 1040 or Form 1040A. Form 1040EZ doesn’t allow you to claim special deductions.
Enter your information in the first part of the “Adjusted Gross Income” section. Stop once you reach the line labeled “Student Loan Interest Deduction,” which is line 33 as of the 2012 tax year.
Refer to the “Student Loan Interest Deduction” section of the form’s instructions to determine whether you qualify for the deduction. You can't claim the deduction if you are using the "Married filing separately" status, and you must meet certain income requirements. As of the 2012 tax year, the deduction is available if your filing status is "Single" or "Head of household" and your adjusted gross income (AGI) is less than $75,000, or if your status is "Married filing jointly" and your AGI is less than $150,000.
Complete the “Student Loan Interest Deduction Worksheet” in the form’s instructions to calculate the amount of your deduction. The amount listed in Box 1 of Form 1098-E is the total interest you paid on your student loan. If you paid interest to more than one lender and received more than one Form 1098-E, enter the total amount from all forms on the worksheet to determine your deduction.
Enter the amount of your deduction in the line labeled “Student Loan Interest Deduction” on Form 1040 or Form 1040A.
Complete Form 1040 or Form 1040A to determine the amount of your tax bill or refund.
Angela M. Wheeland specializes in topics related to taxation, technology, gaming and criminal law. She has contributed to several websites and serves as the lead content editor for a construction-related website. Wheeland holds an Associate of Arts in accounting and criminal justice. She has owned and operated her own income tax-preparation business since 2006.