Sponsors (9)
The bill provides targeted tax relief to lower- and middle-income borrowers by expanding and increasing the student loan interest deduction, but it reduces federal revenue and adds compliance complexity for taxpayers and the IRS.
Middle-class and indebted taxpayers (including families with dependents) can deduct up to $10,000 of student loan interest plus $500 per dependent, lowering taxable income and reducing tax bills.
Taxpayers with modified adjusted gross income below $125,000 (single) or $250,000 (joint) receive the full deduction, concentrating relief on lower- and middle-income filers.
Parents and certain non-student borrowers become eligible because the bill's definition of 'any qualified education loan' is broader, expanding who can claim the deduction.
Taxpayers with MAGI above the phaseout thresholds will see reduced or no benefit, leaving higher-earning borrowers without relief.
The expanded deduction reduces federal revenue, which could increase the deficit or force cuts or offsets to other federal spending if not otherwise financed.
Tight definitions and MAGI adjustments add complexity for filers and preparers and will require IRS guidance and software updates, increasing compliance burden.
Based on analysis of 2 sections of legislative text.
Increases the above-the-line student loan interest deduction to $10,000 plus $500 per dependent and adds an income-based phaseout, effective for tax years after 2025.
Introduced February 12, 2026 by Daniel Goldman · Last progress February 12, 2026
Expands the federal student loan interest deduction by allowing an above-the-line deduction for amounts paid on any qualified education loan and raising the maximum deduction to $10,000 plus $500 per dependent. It also creates an income-based phaseout for higher earners and updates cross-references in the tax code. Applies to taxable years beginning after December 31, 2025; the change will affect taxpayers who pay student-loan interest by lowering taxable income for qualifying borrowers and requires the IRS to update forms and guidance to reflect the new deduction limits and phaseout rules.