What is the maximum amount that can be deducted for student loan interest?

The maximum amount that can be deducted for student loan interest is $2,500. This deduction is available to taxpayers who are legally obligated to pay interest on qualified student loans. It's an important tax benefit as it directly reduces the amount of taxable income, thus lowering the overall tax liability.

The deduction is phased out for higher-income taxpayers. Specifically, the limit starts to decrease for individuals with a modified adjusted gross income (MAGI) above certain thresholds and completely phases out at higher income levels. This is designed to provide relief primarily to those who may need it most, such as students or recent graduates seeking to manage their educational debt.

It's also crucial to note that the deduction can be claimed even if the taxpayer does not itemize deductions, making it an accessible benefit for many borrowers. Understanding the specifics of this deduction can significantly impact tax planning and financial management for those with student loans.