You may be able to deduct interest you pay on qualified student loans. This deduction is an adjustment to income, so itemization on Schedule A is not necessary. The maximum deduction is $1,000 in 1998, $1,500 in 1999, $2,000 in 2000, and $2,500 in 2001 and thereafter. Principal repayment is not deductible.
The deduction may be limited depending on the amount of your modified adjusted gross income. This limit applies if your modified adjusted gross income is more than $40,000 ($60,000 in the case of joint return). If your modified adjusted gross income is more than $55,000 ($75,000 in the case of joint return), you cannot claim a deduction.
You will receive a 1098E form (Student Loan Interest Statement) to providing financial information related to this deduction. The form will be mailed each year in January.