26 U.S.C. § 221 — Interest on education loans

(a) Allowance of deduction: You can deduct the interest you paid during the taxable year on a qualified education loan. (b) Maximum deduction: (1) Except as paragraph (2) reduces it, your deduction for the year can't exceed $2,500. (2) Limitation based on income — the amount you could otherwise deduct is reduced, but never below zero, based on your modified adjusted gross income. Specifically, the reduction equals the deduction amount multiplied by a fraction: the excess of your modified adjusted gross income over $50,000 (or $100,000 for a joint return), divided by $15,000 (or $30,000 for a joint return). "Modified adjusted gross income" means your adjusted gross income figured without regard to this section and sections 85(c), 911, 931, and 933, but after applying sections 86, 135, 137, 219, and 469. (c) Dependents not eligible for deduction: You can't take this deduction for a taxable year if someone else is allowed a deduction for you under section 151 for a tax year beginning in the same calendar year your tax year begins. (d) Definitions: (1) "Qualified education loan" means debt you took on solely to pay qualified higher education expenses that were incurred on behalf of you, your spouse, or your dependent (as of when you took on the debt), paid or incurred within a reasonable time before or after taking on the debt, and tied to education during a period the recipient was an "eligible student." This includes debt used to refinance a qualified education loan. It does not include debt owed to someone related to you under specific tax-code relationship rules, or debt from certain loans against qualified employer retirement plans. (2) "Qualified higher education expenses" means the cost of attendance defined in the Higher Education Act of 1965 (as it stood before the Taxpayer Relief Act of 1997) at an eligible educational institution, reduced by any amount already excluded from your income under sections 127, 135, 529, or 530 for those same expenses, and reduced further by scholarships or similar payments described in section 25A(g)(2). "Eligible educational institution" here has the meaning given in section 25A(f)(2), and also includes institutions running an internship or residency program leading to a degree or certificate from a college, hospital, or health care facility offering postgraduate training. (3) "Eligible student" has the meaning given in section 25A(b)(3). (4) "Dependent" has the meaning given in section 152, without regard to certain exceptions listed there. (e) Special rules: (1) Denial of double benefit — you can't deduct an amount here if you can also deduct it under another provision, or if it's excludable under section 127 because your employer paid off your qualified education loan. Your otherwise-allowable deduction is also reduced by certain section 529 plan distributions that would have been included in your income but were instead treated as paying qualified higher education loan expenses. (2) Married couples must file joint return — if you're married at the end of the tax year, you can only take this deduction if you and your spouse file a joint return. (3) Marital status is determined under section 7703. (f) Inflation adjustments: (1) For tax years beginning after 2002, the $50,000 and $100,000 thresholds in subsection (b)(2) each increase every year by that amount multiplied by the cost-of-living adjustment factor under section 1(f)(3), using 2001 as the base year. (2) Any amount adjusted this way that isn't a multiple of $5,000 gets rounded down to the next lowest multiple of $5,000.