Internal Revenue Service United States Department of the Treasury
Level Basic Advanced Military International

Adjustments to Income Workout

Student Loan Interest

Case Study 6: Determining the Deduction

Here is how a volunteer helped Brenda determine if she can take the deduction for her student loan interest.

Sample Interview
Volunteer Says…   Brenda Responds…
In reviewing your intake and interview sheet, I see you did not indicate if you had any educational expenses. Did you pay any student loan interest this year? Yes, I just graduated a year ago and I'll be paying those loans for a while.
Well, you might be able to take a deduction for that. You are filing as Single and your income before adjustments is not more than the limit for your filing status. Can you show me a statement from the lender? I have two loans, here are the statements.
The interest amounts add up to $2,600. Now, if your interest payments qualify for the deduction, the most we can claim is $2,500. Do you have any questions about that? No, I understand.
I just need to ask a few questions to see if you qualify, okay? Earlier we decided that you cannot be claimed as a dependent on someone else's return, so that's no problem. Can you tell me what you used the loan to pay for? My tuition and fees, and my books.
Did you receive any educational assistance, like from your employer or the Veteran's Administration? No.
How about tax-free withdrawals from a Coverdell educational savings account, another qualified tuition program, or from U.S. savings bonds? No, none of those.
Did you get any other nontaxable payments, not counting gifts, bequests, or inheritances, which were specifically for educational expenses? Heavens no, I wish I had!
It looks like you can claim the maximum deduction of $2,500.
[Indicate on the intake and interview sheet whether Brenda is eligible for this adjustment.]