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When:
January 01, 2001

Who it Affects:
For taxpayers paying back student loans for themselves, their spouses, or dependents.
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2001 Tax Law Changes
Student loan interest deduction rises in 2001

The student loan interest deduction is more valuable for tax year 2001.

Up to $2,500 in student loan interest paid in 2001 can be deducted on 2001 income tax returns, up from $2,000 in 2000. The interest must be paid during the first 60 months in which interest payments are required.

This requirement is repealed in 2002.

The deduction can be claimed regardless of whether you itemize your deductions on Schedule A.

But eligibility is limited, depending on your modified adjusted gross income. If youre married and filing jointly, you can deduct all $2,500 if your AGI is $60,000 or less. The deduction phases out when your income level is between $60,000 and $75,000.

For other filers, you get the full deduction if you earn $40,000 or less. The deduction phases out when your income level is between $40,000 and $55,000.

Related Tax Article(s): 6 tax-savvy ways to pay for college