Learn what Form 1098-E reports, who may claim the student loan interest deduction, the $2,500 limit and 2026 phaseouts, and California treatment.
Form 1098-E, Student Loan Interest Statement, reports qualified student-loan interest received by a lender during the year. A required filer generally issues the form when it receives at least $600 of student-loan interest from a borrower.
The $600 amount is a lender reporting threshold — not the minimum interest a taxpayer must pay to claim a deduction. A borrower may have deductible interest below $600 without receiving the form, while a borrower who receives Form 1098-E may still be ineligible for a deduction.
Box 1 shows student-loan interest received by the lender. The form also identifies the lender, borrower, and account. Depending on the loan's timing and reporting, the amount may include certain loan-origination fees or capitalized interest.
Compare the form with the online lender statement and payment history. A borrower with multiple loan servicers may receive more than one Form 1098-E. Add only eligible interest actually paid for the same tax year, and avoid duplicating amounts when loans were transferred between servicers.
An eligible taxpayer may deduct up to $2,500 of qualified student-loan interest paid during the year as an adjustment to income. The taxpayer does not need to itemize deductions on Schedule A. The deduction appears on Schedule 1 and reduces adjusted gross income.
The allowable amount is the smaller of:
The result can then be reduced or eliminated by the modified-adjusted-gross-income phaseout.
The detailed requirements matter. In general:
The eligible student can be the taxpayer, spouse, or a person who was a dependent when the debt was incurred, subject to the statutory rules. Interest paid by a parent on a loan legally owed only by an adult child does not automatically become the parent's deduction.
A qualified student loan generally must be incurred solely to pay qualified higher-education expenses that were:
Loans from related persons and qualified employer plans do not qualify. Refinancing can qualify to the extent it refinances a qualified student loan, but cash taken out for another purpose can complicate or reduce eligibility.
Elena is single and receives two Forms 1098-E for 2026:
She paid $3,000 of qualified interest, so the deduction begins with the $2,500 annual maximum.
For 2026, the federal deduction begins to phase out when MAGI exceeds $85,000 for single, head-of-household, or qualifying-surviving-spouse filers and is eliminated at $100,000. For joint filers, the 2026 phaseout range is over $175,000 through $205,000. If Elena's deduction MAGI falls inside her range, the $2,500 is reduced under the worksheet rather than deducted in full.
These figures are tax-year specific and must be reviewed annually.
When another person makes a payment on a borrower's legally obligated loan, the tax result can depend on whether tax law treats the payment as made by the borrower and whether the borrower can be claimed as a dependent. Preserve proof of the payment and the legal borrower.
Employer educational assistance can also affect the calculation. Interest paid or reimbursed under a tax-free employer educational-assistance program cannot also create a student-loan-interest deduction. Avoid claiming two tax benefits for the same interest.
For 2025, the student-loan-interest deduction appears on Schedule 1 in the adjustments-to-income section and flows into adjusted gross income on Form 1040 or Form 1040-SR. The form line can change, so verify it for the filing year.
Form 1098-E itself generally does not attach to the return. Retain it with the loan history, payment records, and education documentation.
California generally conforms to the federal student-loan-interest deduction, but the state calculation and limited exceptions must be checked using Schedule CA instructions. For 2025 residents, the FTB Schedule CA (540) instructions provide a student-loan-interest worksheet and identify a special rule involving a spouse or registered domestic partner of a non-California-domiciled military taxpayer residing in a community-property state.
California taxpayers should not assume that the federal result always transfers unchanged. Registered domestic partnership, military, residency, or other federal-state differences can require a Schedule CA adjustment.
Heath Income Tax can verify loan and borrower eligibility, calculate the federal deduction and MAGI phaseout, and identify California adjustments.
Can I claim interest below $600 without Form 1098-E?
Yes, if the interest and taxpayer otherwise qualify and the payment is adequately documented. The $600 rule generally determines lender reporting, not taxpayer eligibility.
Do I have to itemize to deduct student-loan interest?
No. It is an adjustment to income reported on Schedule 1, subject to eligibility and phaseout rules.
Can a parent claim interest paid on a child's loan?
Only if the legal-obligation, payment, dependency, and other requirements support the parent's deduction. Paying someone else's debt is not enough by itself.
Can I deduct more than $2,500 if I receive several forms?
No. The $2,500 maximum applies to the taxpayer's combined qualified student-loan interest for the year before any MAGI phaseout.
The definitions and examples on this page are for informational purposes only and do not constitute tax advice. Tax laws change frequently and individual circumstances vary. Consult a qualified tax professional before making decisions based on this content.
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