Interest paid on student loans is deductible on your tax return; this will be true whether you take the standard deduction or you itemize. The maximum deduction claim on your tax return is $2,500 regardless of your filing status. If your income exceeds certain levels, however, this maximum deduction will be phased out.

For 2012, the phase-out ranges are as follows:

• $60,000 to $75,000 for persons filing as single or head of household. And
• $120,000 to $150,000 for married persons filing jointly.

If your income falls below the floor level for your filing status, you are entitled to a full deduction for the student loan interest you paid during the year, and if your income is higher than the ceiling for your filing status no deduction is allowed. If your income falls in between the floor and ceiling for your filing status there is a ratable reduction in your student loan deduction. Finally, if your filing status is married filing separately you are not entitled to any deduction for student loan interest, regardless of your income level.

For year 2013, the deduction will be limitied to the interest paid during the first five years the loan requires payments (unless Congress extends former law).

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