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Introduced February 12, 2026 by Daniel Goldman · Last progress February 12, 2026
Expands the federal student loan interest deduction so taxpayers can deduct up to $10,000 of payments per year plus an additional $500 for each dependent. The deduction phases out for higher‑income filers and applies to payments on qualified education loans. The change modifies the tax code, adjusts some cross‑references, and becomes effective for tax years starting after December 31, 2025. The Internal Revenue Service would administer the deduction under the revised rules.
The bill provides targeted tax relief for many lower‑ and middle‑income student loan borrowers by expanding and capping a student loan interest deduction, but it reduces federal revenue and adds complexity while phasing out benefits for higher earners.
Middle‑income and lower‑income taxpayers with student loan debt can reduce their taxable income by deducting up to $10,000 plus $500 per dependent in student loan interest each year.
Borrowers get a broader tax break because the deduction applies to any 'qualified education loan', increasing the number and types of loans that qualify for relief.
The deduction phases out above $125,000 ($250,000 joint), concentrating benefits on lower‑ and middle‑income filers who are more likely to need relief.
Higher‑income taxpayers (MAGI above $125K/$250K joint) will see the deduction reduced or eliminated, so some borrowers with large loan balances receive little or no benefit.
Expanding the student loan interest deduction reduces federal revenue, which could increase the deficit or require future tax increases or spending cuts to offset the loss.
The complex MAGI rules and cross‑references to multiple tax code sections increase tax preparation complexity and may raise compliance costs for filers and tax software providers.