Student Loan Interest Deduction
http://www.irs.gov/taxtopics/tc456.html
Ø What are the requirements and amount of student loan interest deduction a taxpayer may qualify for?
Taxpayers may only deduct a maximum of $2,500 in student loan interest per year, subject to phase out. Your modified adjusted gross income cannot be more than $80,000 (or $160,000 for married couples filing jointly). If you earn between $65,000 and $80,000 (or $130,000 to $160,000 for married filing jointly), the deduction is slowly reduced until you reach the upper limit.
Ø Topic 456 - Student Loan Interest Deduction
You may be able to deduct interest you pay on a qualified student loan. Generally, the amount you may deduct is the lesser of $2,500 or the amount of interest you paid and it is subject to a phaseout, which means the amount of the deduction gradually decreases and phases out completely when your modified adjusted gross income (MAGI) amount reaches the annual limit.
You claim this deduction as an adjustment to income so you do not need to itemize your deductions on Form 1040, Schedule A (PDF), Itemized Deductions.
You can claim the deduction if all the following apply:
You paid interest on a qualified student loan in tax year
You are legally obligated to pay interest on a qualified student loan
Your filing status is not married filing separately
Your MAGI is less than a specified amount which is set annually, and
You or your spouse, if filing jointly, cannot be claimed as dependents on someone else's return
A qualified student loan is a loan you took out solely to pay qualified higher education expenses. See Publication 970, Tax Benefits for Education, and the Form 1040 Instructions (PDF) to determine if your expenses qualify.