Student Loan Interest Deduction in California
The student loan interest deduction allows eligible taxpayers to deduct up to $2,500 of interest paid on qualified student loans from their federal taxable income in 2025. It is an above-the-line deduction, meaning it reduces adjusted gross income even for taxpayers who take the standard deduction, and it applies to loans used to pay for tuition, fees, room, board, and other qualified education expenses.
California conforms to the federal student loan interest deduction, so California residents can also deduct up to $2,500 of qualifying interest on their state return. The federal deduction phases out for single filers with modified adjusted gross income between $75,000 and $90,000 and for joint filers between $155,000 and $185,000 in 2025. California's phase-out thresholds generally follow the federal figures.
California borrowers with loans from schools like UC Berkeley, UCLA, USC, or Cal State campuses should receive Form 1098-E from their loan servicer showing total interest paid. Given California's high state income tax rates, this deduction can produce meaningful savings at both the federal and state level, making it worth confirming that all qualifying interest is captured before filing.