Is Student Loan Interest tax deductible?

An annual tax deduction of up to $2,500 in 2006 is available for interest paid on tax qualified education loans. Because the tax deduction is claimed on Line 33 of Form 1040 and Line 18 of Form 1040A it is available regardless of whether you itemize tax deductions on your tax return (i.e., the tax deduction is "above the line"). 

You cannot claim the student loan interest tax deduction on your tax return in any tax year you are claimed as a dependent by another taxpayer; if you are married and file a separate tax return; on student loan interest paid to a related person; or for any amount that you deduct for tax purposes on your tax return under any other provision of the tax law.

A tax qualified student loan is defined as indebtedness incurred to pay for the qualified higher education expenses of the taxpayer, a spouse, or any other dependent in attending a college, university, post-secondary educational institution, certain vocational schools, or other institutions eligible to participate in Department of Education student aid programs.

You must carry at least one half the normal full time student work load and you must be enrolled in a degree, certificate, or other program leading to a recognized educational credential.

Qualified educational expenses generally include:

These expenses must be reduced by the following:

The tax deduction is phased out for taxpayers with modified adjusted gross income between $105,000 and $135,000 for joint tax return filers ($50,000 and $65,000 for single tax return filers).