Five Tax Breaks for Paying Your Student Loan
After a three-year pause student loan payments have resumed, putting a dent in people's wallets. But there are some tax breaks that can help.

Getting the right tax advice and tips is vital in the complex tax world we live in. The Kiplinger Tax Letter helps you stay right on the money with the latest news and forecasts, with insight from our highly experienced team (Get a free issue of The Kiplinger Tax Letter or subscribe). You can only get the full array of advice by subscribing to the Tax Letter, but we will regularly feature snippets from it online, and here is one of those samples…
It’s finally fall. Leaves are changing color. Children and some adults are awaiting trick-or-treat. And student loan payments have resumed putting a dent in a lot of people’s wallets after a three-year halt on repaying college debt ended. But these tax breaks can help ease the pain.
1. There’s a deduction for student loan interest
Taxpayers needn’t itemize on Schedule A of the Form 1040 to take this write-off.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
- Up to $2,500 of student loan interest paid each year can be claimed as a deduction on Schedule 1 of the Form 1040
- For 2023, the break begins to phase out for single filers with modified adjusted gross incomes above $75,000 and for joint filers with modified AGIs over $155,000. It ends for taxpayers with modified AGIs over $90,000 and $185,000, respectively
- Parents who help a child repay student loans generally can’t take the write-off unless they are also legally liable on the loans. But, even if a parent paid the loan and can't take the write-off, a child who meets the modified AGI limits can still take the interest deduction, provided he or she isn’t eligible to be claimed as a dependent on the parents’ return. The IRS treats this as if the parent gifted money to the child, who then paid the debt
2. Most student loan debt forgiven in 2021 through 2025 is tax-free for federal income tax purposes
This relief, enacted in the March 2021 stimulus law, is an exception to the general rule that cancellation of indebtedness is taxable. IRS has instructed lenders and loan servicers to not issue Form 1099-C to borrowers whose student loans are forgiven during this time period, and the discharged debt is excluded from income. Some states have different tax rules, which can be confusing.
3. Up to $10,000 from 529 accounts can be used to help pay off college debt of the account beneficiary without having to pay income tax on the withdrawals
It’s important to note that this $10,000 is a lifetime limit, not an annual limit. 529 distributions for student loan repayments that exceed $10,000 are taxable in part to the extent of the excess and are also subject to a 10% penalty.
4. Employers that offer qualified educational assistance programs can help
These programs can be used to pay down up to $5,250 of an employee’s college loans each year through 2025. The payments are excluded from workers’ wages for tax purposes.
5. Relief can be offered through workplace retirement plans, starting in 2024
A new law will allow employer 401(k) matches conditioned on student loan repayments made by employees.
The IRS blessed such a program in a 2018 private letter ruling. In that situation, the firm contributed to its 401(k) plan on behalf of employees paying down their college debt. The employer matches took place regardless of whether employees also paid in. Participation was voluntary, and employees had to elect to enroll in the program. Employers have been lobbying Congress for years to enact a statute to allow them to do this without seeking a private ruling from the IRS, and lawmakers obliged them last year in the SECURE 2.0 law.
This first appeared in The Kiplinger Tax Letter. It helps you navigate the complex world of tax by keeping you up-to-date on new and pending changes in tax laws, providing tips to lower your business and personal taxes, and forecasting what the White House and Congress might do with taxes. Get a free issue of The Kiplinger Tax Letter or subscribe.
Related stories
- A Little-Known Tax-Free Way To Help Pay Your Student Loan
- How to Prepare to Start Paying Student Loans Again
- What Happens When Student Loan Payments Resume?
- What a Government Shutdown Means for Student Loan Payments
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Joy is an experienced CPA and tax attorney with an L.L.M. in Taxation from New York University School of Law. After many years working for big law and accounting firms, Joy saw the light and now puts her education, legal experience and in-depth knowledge of federal tax law to use writing for Kiplinger. She writes and edits The Kiplinger Tax Letter and contributes federal tax and retirement stories to kiplinger.com and Kiplinger’s Retirement Report. Her articles have been picked up by the Washington Post and other media outlets. Joy has also appeared as a tax expert in newspapers, on television and on radio discussing federal tax developments.
-
Stock Market Today: Stocks Stable as Inflation, Tariff Fears Ebb
Constructive trade war talks and improving consumer expectations are a healthy combination for financial markets.
-
What Trump’s 'Big Beautiful Bill' Means for Your Utility Bills
If passed, the 'Big Beautiful Bill' could make home energy upgrades more expensive and raise monthly costs. Here's how much more you might pay and how to prepare.
-
Ask the Editor, June 6: Questions on Hobby Losses, Medicare
In our latest Ask the Editor round-up, Joy Taylor, The Kiplinger Tax Letter Editor, answers questions on hobby losses, I bonds and Medicare premiums.
-
Tax Rule Change Could See Millions Lose Health Insurance
The Kiplinger Tax Letter If current rules for the health premium tax credit (PTC), a popular Obamacare subsidy, aren't extended, 3.7 million people could lose their health insurance.
-
Ask the Editor, May 30: Questions on the One Big Beautiful Bill
Ask the Editor In this week's Ask the Editor Q&A, we answer tax questions from readers on the House-passed “One Big Beautiful Bill.”
-
Ask the Editor, May 23: Reader Questions on Gifts, Estate Tax
In this week's Ask the Editor Q&A, we answer tax questions from readers on gifts, the estate tax and stepped-up basis upon death.
-
Travel Trends You Can Expect This Summer
The Kiplinger Letter Domestic trips will trump foreign travel amid economic uncertainties, though some costs are down.
-
AI Goes To School
The Kiplinger Letter Artificial intelligence is rapidly heading to K-12 classrooms nationwide. Expect tech companies to cash in on the fast-emerging trend.
-
Ask the Editor, May 16 — Reader Questions on Capital Gains
In our latest Ask the Editor round-up, Joy Taylor, The Kiplinger Tax Letter Editor, answers three questions from readers on capital gains.
-
Government Watchdog Warns More IRS Layoffs to Come
IRS Over 11,400 IRS employees took the Trump-instructed buyout or were terminated. What does it mean for your taxes going forward?