If you took out student loans and paid interest on these loans, up to $2,500 of the interest paid can be used as a tax deduction. This deduction will reduce your total income amount that is subject to taxation by the Federal government.

Even if you don't itemize deductions when you file a tax return – that is, you opt to take the standard deduction – you can still use this interest deduction to reduce your taxes.

Student loan interest is interest you paid during the year on a loan you took out to pay qualified higher education expenses such as tuition and fees; room and board; books, supplies, and equipment; or other necessary expenses such as transportation, that were:

1. for you, your spouse, or a person who was your dependent when you took out the loan
2. paid within a reasonable period of time before or after you took out the loan, and
3. for an eligible student

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• Interest paid while a loan is not in repayment (such as forbearance or deferment) is also deductible.
• You cannot claim the deduction if your parents claim you as a dependent on their taxes.
• Eligibility is phased out for unmarried taxpayers with annual gross income of $50,000 to $65,000 (and $105,000 to $135,000 for joint filers).

Tax credits and deductions are different: a tax credit directly reduces the amount of income tax you may have to pay, while a deduction reduces the amount of income subject to tax.

The information contained in this section is from IRS Publication 970: Tax Credits for Education. PNC and Villanova University do not provide tax advice and makes no representation or warranty as to the accuracy of the information. Please consult your tax advisor for tax advice matters contained in this section.

For more information, visit www.irs.gov or call 1-800-829-1040.