How to Claim the Parent PLUS Loan Tax Deduction

Interest you pay on a federal Parent PLUS Loan qualifies for the student loan interest deduction, so the Parent PLUS Loan tax deduction can lower your taxable income by up to $2,500 a year. It’s an above-the-line adjustment, meaning you get it whether you itemize or take the standard deduction. Only the parent, as the legally obligated borrower, can claim it, and eligibility depends on your filing status and income.¹

Who Can Claim It

The parent listed on the Parent PLUS promissory note is the one who claims the deduction. Even if your child makes the monthly payments after graduation, the IRS treats those payments as a gift to you; the student cannot deduct the interest on their own return.²

Two rules disqualify parents who would otherwise be eligible. First, if you file as married filing separately, the deduction is off the table entirely. No phase-out, no partial amount. This matters if you file separately to keep an income-driven repayment amount low: doing so costs you the interest write-off. Second, neither you nor your spouse can be claimed as a dependent on someone else’s return for the year.¹

The student had to qualify as your dependent when you took out the loan, not now. That distinction matters because Parent PLUS repayment often stretches 10 to 25 years. A loan taken out when your child was a 19-year-old dependent still generates a deductible interest payment when they’re 30 and filing their own taxes.³

How Much You Can Deduct

The deduction is the lesser of $2,500 or the total qualifying interest you actually paid during the year.¹ The loan itself must have been taken out solely to pay qualified higher education expenses, including tuition, fees, room and board, books, and supplies, for a student enrolled at least half-time in a degree or certificate program.²

What Counts as Interest

Several kinds of payments qualify beyond your standard monthly interest charge:

Voluntary prepayments. If you paid interest during the grace period, a deferment, or before payments were required, that interest is deductible in the year you paid it.¹
Capitalized interest. Interest that accrued during deferment and was added to your principal becomes deductible as you pay the principal down. You cannot deduct capitalized interest in a year when you make no loan payments.²
Loan origination fees. The upfront fee charged when a Parent PLUS Loan is disbursed is treated as interest that accrues over the life of the loan, provided it represents a charge for borrowing rather than a processing cost.²

Capitalized interest is the category parents most often miss. Deferment doesn’t eliminate the deduction; it just spreads it out.

2026 Income Limits

The deduction phases out based on your modified adjusted gross income. For 2026:

Single, head of household, or qualifying surviving spouse: phase-out begins at $85,000 MAGI and the deduction is gone at $100,000.⁴
Married filing jointly: phase-out begins at $175,000 and ends at $205,000.⁴

Inside the phase-out range, you get a partial deduction calculated using the worksheet in the Schedule 1 instructions. The reduction is proportional, so a filer at the midpoint keeps roughly half. For most domestic filers, MAGI equals AGI.²

Refinancing and Consolidation

Refinancing the loan, either through a federal Direct Consolidation Loan or a private lender, doesn’t kill the deduction. The IRS treats the new loan as a qualified education loan as long as it was used solely to pay off the original qualified student loan of the same borrower.²

One trap: if you refinance for more than the existing balance and use the extra cash for anything other than qualified education expenses, the deduction disappears on the entire refinanced loan. It’s all-or-nothing. A cash-out refinance where the excess funds a car or home repair disqualifies every dollar of interest on the new loan.

Form 1098-E and Records

Your loan servicer sends Form 1098-E, the Student Loan Interest Statement, if you paid $600 or more in interest during the year. It’s due to you by January 31.⁵ Box 1 shows total interest received by the lender.

Paid less than $600? You can still claim the deduction. Log into your servicer’s portal or request a year-end statement showing the interest paid.

Compare Form 1098-E against your own payment records before you file. The IRS gets a copy of the form and matches it against your return.

How to Enter It on Your Return

Report the deduction on Schedule 1 of Form 1040, Line 21. Cap the entry at $2,500 if your interest paid exceeded that amount, or use the reduced figure from the phase-out worksheet if your MAGI falls in the phase-out range.⁶ The Schedule 1 total flows into your AGI calculation on the main Form 1040. Tax software handles the phase-out math once you enter the Box 1 figure from your 1098-E.

You don’t attach Form 1098-E to your return, but keep it with your tax records for at least three years from the date you file.²

1
Internal Revenue Service. Topic No. 456, Student Loan Interest Deduction
2
Internal Revenue Service. Publication 970 (2025), Tax Benefits for Education
3
Office of the Law Revision Counsel. 26 U.S. Code 221 – Interest on Education Loans
4
Internal Revenue Service. Revenue Procedure 2025-32
5
Internal Revenue Service. Instructions for Forms 1098-E and 1098-T (2025)
6
Internal Revenue Service. 2025 Schedule 1 (Form 1040)