Form 1098-E: Student Loan Interest Statement and How It Can Help You Save on Taxes

If you’ve ever borrowed money for school, chances are you’ve received a Form 1098-E. Your loan servicer provides this form to help you track the interest paid on your student loans throughout the year. For many borrowers, Form 1098-E can mean tax savings. You can deduct up to a certain amount in interest on your federal tax return.

In 2023, U.S. borrowers collectively paid billions in student loan interest, according to financial data reports. That’s a staggering amount, and it’s why understanding how to use Form 1098-E is important.

What is Form 1098-E?

The Student Loan Interest Statement form reports how much interest you paid on a qualified student loan. This interest is often deductible, which means you could reduce your taxable income and, in turn, pay less in taxes.

Your student loan servicer sends this form if you paid at least $600 in interest during the tax year. You may receive more than one Form 1098-E if you have multiple loans.

How Can You Benefit from Form 1098-E?

The main benefit of Form 1098-E is that it allows you to claim a tax deduction for the interest you paid on your student loans. The IRS lets eligible borrowers deduct up to $2,500 of student loan interest, depending on their income and filing status.

This deduction qualifies as an “above-the-line” deduction, which means it reduces your taxable income before applying other deductions or credits. Instead, you can claim it as an adjustment to income on your federal tax return.

Who Can Claim the Student Loan Interest Deduction?

To qualify for the deduction with Form 1098-E, you must meet certain criteria:

1. You must have a qualified loan: You obtained the loan specifically to cover eligible education costs, including tuition, books, room and board, and other essential expenses. You must also have enrolled at least half-time in a program leading to a degree or certificate.
2. You must be legally responsible for repaying the loan: Only the person responsible can claim the deduction. If someone else, like a parent, pays the loan but is not legally obligated to repay it, they cannot claim the deduction.
3. Your filing status cannot be ‘married filing separately’: You are ineligible to claim this deduction if your filing status is “married filing separately.” Additionally, neither you nor your spouse can be claimed as dependents on another taxpayer’s return.
4. There are income limitations to qualify: For the 2024 tax year, the deduction starts to phase out when your modified adjusted gross income (MAGI) exceeds $75,000 if you are a single filer or $155,000 if you file jointly. You lose the full deduction if your MAGI exceeds $95,000 (single) or $195,000 (joint).
5. You can deduct up to $2,500 in interest paid: The deduction allows you to reduce your taxable income by either the total interest paid during the year or $2,500, whichever is lower. This includes both required interest payments and any voluntarily prepaid interest.​

How to Use Form 1098-E on Your Tax Return

Once you receive Form 1098-E, use the information to claim your student loan interest deduction on your tax return. 

Start by reporting the total interest paid, listed in Box 1 of the 1098-E form. You enter this amount on Schedule 1, Line 21 of your Form 1040 under “Adjustments to Income.” This deduction reduces your adjusted gross income (AGI) and can potentially lower your overall tax liability.

If you have multiple student loan servicers, each one will send you a separate 1098-E form if you paid $600 or more in interest to them. In this case, you must combine the interest amounts from all forms and report the total on your return. If you didn’t pay $600 or more to any single servicer but paid that amount across multiple servicers, you can request interest statements from each servicer to track the total.

Note that the IRS doesn’t require you to attach Form 1098-E to your tax return. However, it’s important to keep the form in your records for at least three years in case of an audit.

What if You Didn’t Receive a Form 1098-E?

If you didn’t receive Form 1098-E because you paid less than $600 in student loan interest during the year, you can still claim the student loan interest deduction if you meet the eligibility requirements. The IRS only mandates loan servicers to issue Form 1098-E if you paid $600 or more in interest. However, even if you don’t get the form, you are still entitled to the deduction for any interest you paid, as long as you qualify.

In this case, you’ll need to contact your loan servicer to determine the exact amount of interest you paid during the year. Many services offer this information through their online accounts or via customer service. Once you have the total, you can report it on your tax return to claim the deduction.

Don’t Miss Out on Valuable Deductions

Form 1098-E may not seem like much, but it could save you money on your taxes. The Student Loan Interest Deduction is one of the few tax breaks available even if you don’t itemize, so be sure to take advantage of it if you qualify.

If you have any questions about your taxes or need help understanding how to apply the deduction, contact Tax Samaritan. We’re here to ensure you don’t miss any valuable tax savings.