Publication 970

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## Figuring the Deduction(p32) |

Your student loan interest deduction for 2010 is generally the smaller of:
However, the amount determined above may be gradually reduced
(phased out) or eliminated based on your filing status and MAGI as explained
below. You can use
Worksheet 4-1
(at the end of this chapter) to figure both your MAGI and your deduction.

taxmap/pubs/p970-021.htm#en_us_publink1000178281## Form 1098-E.(p32) |

To help you figure your student loan interest deduction, you
should receive Form 1098-E. Generally, an institution (such as a bank or
governmental agency) that received interest payments of $600 or more during 2010
on one or more qualified student loans must send Form 1098-E (or acceptable
substitute) to each borrower by January 31, 2011.

For qualified student loans taken out before September 1, 2004,
the institution is required to include on Form 1098-E only payments of stated
interest. Other interest payments, such as certain loan origination fees and
capitalized interest, may not appear on the form you receive. However, if you
pay qualifying interest that is not included on Form 1098-E, you can also deduct
those amounts. See
*Allocating Payments Between Interest and Principal*, earlier.

The lender may ask for a completed Form W-9S, Request for Student's or
Borrower's Taxpayer Identification Number and Certification, or similar
statement to obtain the borrower's name, address, and taxpayer identification
number. The form may also be used by the borrower to certify that the student
loan was incurred solely to pay for qualified education expenses.

taxmap/pubs/p970-021.htm#en_us_publink1000178283## Effect of the Amount of Your Income on the Amount of Your Deduction(p32) |

The amount of your student loan interest deduction is phased
out (gradually reduced) if your MAGI is between $60,000 and $75,000 ($120,000
and $150,000 if you file a joint return). You cannot take a student loan
interest deduction if your MAGI is $75,000 or more ($150,000 or more if you file
a joint return).

taxmap/pubs/p970-021.htm#en_us_publink1000178284## Modified adjusted gross income (MAGI).(p33) |

For most taxpayers, MAGI is adjusted gross income (AGI) as figured
on their federal income tax return before subtracting any deduction for student
loan interest. However, as discussed below, there may be other modifications.

Table 4-2 shows how the amount of your MAGI can affect your student
loan interest deduction.

taxmap/pubs/p970-021.htm#en_us_publink1000178285
#### Table 4-2. Effect of MAGI on Student Loan Interest Deduction

IF your filing status is... | AND your MAGI is... | THEN your student loan interest deduction is... |

single,
head of household, or qualifying widow(er) | not more than $60,000 | not affected by the phaseout. |

more than $60,000
but less than $75,000 | reduced because of the phaseout. | |

$75,000 or more | eliminated by the phaseout. | |

married filing joint return | not more than $120,000 | not affected by the phaseout. |

more than $120,000 but less than $150,000 | reduced because of the phaseout. | |

$150,000 or more | eliminated by the phaseout. |

MAGI when using Form 1040A.(p33) |

If you file Form 1040A, your MAGI is the AGI on line 22 of that
form figured without taking into account any amount on line 18 (Student loan
interest deduction) and line 19 (Tuition and fees deduction).

taxmap/pubs/p970-021.htm#en_us_publink1000178288MAGI when using Form 1040.(p33) |

If you file Form 1040, your MAGI is the AGI on line 38 of that
form figured without taking into account any amount on line 33 (Student loan
interest deduction), line 34 (Tuition and fees deduction), and line 35 (Domestic
production activities deduction), and modified by adding back any:

taxmap/pubs/p970-021.htm#en_us_publink1000178289MAGI when using Form 1040NR.(p33) |

If you file Form 1040NR, your MAGI is the AGI on line 36 of that
form figured without taking into account any amount on line 33 (Student loan
interest deduction) and line 34 (Domestic production activities deduction).

taxmap/pubs/p970-021.htm#en_us_publink1000178290MAGI when using Form 1040NR-EZ.(p33) |

If you file Form 1040NR-EZ, your MAGI is the AGI on line 10 of
that form figured without taking into account any amount on line 9 (Student loan
interest deduction).

taxmap/pubs/p970-021.htm#en_us_publink1000178291## Phaseout.(p33) |

If your MAGI is within the range of incomes where the credit
must be reduced, you must figure your reduced deduction. To figure the phaseout,
multiply your interest deduction (before the phaseout) by a fraction. The
numerator is your MAGI minus $60,000 ($120,000 in the case of a joint return).
The denominator is $15,000 ($30,000 in the case of a joint return). Subtract the
result from your deduction (before the phaseout) to give you the amount you can
deduct.

taxmap/pubs/p970-021.htm#en_us_publink1000178292During 2010 you paid $800 interest on a qualified student loan.
Your 2010 MAGI is $145,000 and you are filing a joint return. You must reduce
your deduction by $667, figured as follows.

Your reduced student loan interest deduction is $133 ($800 −
$667).

taxmap/pubs/p970-021.htm#en_us_publink1000178294$800 | × | $145,000 − $120,000$30,000 | = | $667 |

The facts are the same as in
*Example 1*
except that you paid $2,750 interest. Your maximum deduction for 2010 is $2,500.
You must reduce your maximum deduction by $2,083, figured as follows.

In this example, your reduced student loan interest deduction
is $417 ($2,500 − $2,083).

taxmap/pubs/p970-021.htm#en_us_publink1000178296$2,500 | × | $145,000 − $120,000$30,000 | = | $2,083 |

## Which Worksheet To Use(p33) |

Generally, you figure the deduction using the Student Loan Interest
Deduction Worksheet in the instructions for Form 1040, Form 1040A, or Form
1040NR. However, if you are filing Form 2555, 2555-EZ, or 4563, or you are
excluding income from sources within Puerto Rico, you must complete
Worksheet 4-1 at the end of this chapter.

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