Student Loan Interest Deduction 2027: $90,000 Phase-Out (Official)

Every fall, the same small argument plays out in personal-finance forums: someone with a raise coming in January wants to know whether they are about to lose the student loan interest deduction, and nobody can point to an official number for the year ahead until the IRS publishes one. The short answer: the IRS published it on November 5, 2026, in Revenue Procedure 2026-35, section 3.31 (news release IR-2026-133). The 2027 phase-out range runs from $90,000 to $105,000 of modified adjusted gross income for single filers, and from $180,000 to $210,000 for married couples filing jointly — both $5,000 higher than the 2026 range. The maximum deduction itself stays fixed at $2,500, because the statute does not index that number.

The deduction and the phase-out, in the statute’s own terms

The student loan interest deduction lives at 26 U.S.C. § 221, and its basic structure is simpler than most tax provisions: a borrower who paid interest on a qualified education loan during the year can deduct up to $2,500 of it, without having to itemize. That $2,500 ceiling is written directly into the statute as a dollar figure, and unlike almost every other number in the tax code, it was never given an inflation-adjustment mechanism. It has been $2,500 since the deduction was restructured in 2001, and section 221 contains no provision that would change it for 2027 or any year after.

What does move every year is the income range in which the deduction phases out. Section 221(b)(2)(B) reduces the allowable deduction in proportion to how far a filer’s modified adjusted gross income sits above a base threshold, relative to a fixed-width range: $50,000 above the threshold for single filers, spread across a $15,000-wide range, and $100,000 above the threshold for joint filers, spread across a $30,000-wide range. Those $15,000 and $30,000 range widths are themselves fixed in the statute and never move — only the starting thresholds, $50,000 and $100,000, get adjusted for inflation under section 221(f). That is why the phase-out window keeps the same $15,000 and $30,000 span every year even as the entry point drifts upward.

Modified adjusted gross income for this purpose is not the same figure that appears on the last line of a Form 1040. Section 221(b)(2)(C) defines it as adjusted gross income computed without regard to the section 221 deduction itself, and without regard to the foreign earned income and housing exclusions under section 911 and the exclusions for income from U.S. possessions and Puerto Rico under sections 931 and 933 — but still taking into account the effects of sections 86, 135, 137, 219 and 469 on the return. Working through those cross-references by hand is exactly the kind of thing that goes wrong on a napkin calculation, which is why this site keeps a dedicated explainer on modified adjusted gross income that walks through each add-back in order rather than trying to compress it into a single sentence here.

One more structural point matters more than it might seem: section 221(e)(2) requires a married taxpayer to file a joint return to claim any part of the deduction at all. There is no married-filing-separately phase-out range published anywhere, in any year, because that filing status is categorically excluded from the deduction — not phased down to zero at some income level, simply not eligible from the first dollar. A borrower weighing separate filing for some other reason, such as an income-driven repayment plan calculation, needs to know that choosing separate returns also forfeits this deduction entirely, independent of income.

The indexing formula, and why the range widths don’t move

Section 221(f) is where the $50,000 and $100,000 base thresholds actually get adjusted. It indexes both figures using the cost-of-living formula in section 1(f)(3) — the same formula that resets the federal income tax brackets, the standard deduction, and a long list of other thresholds each autumn, all tracked together on this site’s 2027 IRS inflation adjustments tracker. The statute sets calendar year 2001 as the base year for this particular provision, and it includes one further instruction that shapes the final number: if the adjusted amount isn’t already a multiple of $5,000, it gets rounded down to the next lowest multiple of $5,000.

That rounding rule is why the threshold sometimes sits still for a year and then jumps by $5,000 the next. The underlying inflation math produces a smooth, continuously increasing number, but the published threshold only moves when that smooth number crosses another $5,000 line. A borrower checking the IRS’s number every October is really watching a staircase, not a ramp.

The formula itself runs on a twelve-month window: the average of the chained CPI-U for all urban consumers over the twelve months ending August 31 of the year before the tax year in question. For the 2027 thresholds, that window runs from September 2025 through August 2026, and the final month it needs — August 2026 — was published by the Bureau of Labor Statistics on September 11, 2026, with a chained CPI-U reading of 185.739. The window was complete. The IRS publishing the resulting dollar figure, on November 5, 2026, was a separate, later administrative step, and it confirmed the projection.

Checking the method against 2026

Before trusting a formula to project a number the IRS had not announced, it was worth running it against a number the IRS already has announced, to see if it reproduces the right answer. For 2026, Revenue Procedure 2025-32, section 4.29, set the student loan interest phase-out at $85,000 for single filers and $175,000 for joint filers. Running the same cost-of-living mechanics against the confirmed 2026 window produces unrounded figures of $88,359.25 (single) and $176,718.51 (joint) — both of which round down to exactly $85,000 and $175,000 under the statute’s rounding rule. That control check matches, using the identical single-window average, in the range of 177.1105 to 177.1135, that reproduces every other 2026 figure this site has tested. The formula being applied to 2027 below is the same mechanism that already checked out against a published, official number, not a separate method built to fit a target.

Why the October 2025 data gap didn’t move the answer

There is one real complication inside the twelve-month window feeding the 2027 calculation, and it deserves to be named plainly rather than smoothed over. The Bureau of Labor Statistics never published a chained CPI-U reading for October 2025, because data collection stopped during that year’s government shutdown. Anyone reconstructing a full twelve-month average for that window has to choose between two approaches: average the eleven months that do exist, or substitute an imputed estimate for the missing month.

For this particular deduction, the choice did not change the published outcome. Averaging the eleven published months produces an unrounded single-filer threshold of $91,226.13; imputing the missing month instead produces $91,112.82. The joint-filer figures move in parallel: $182,452.26 versus $182,225.64. Those pairs differ by roughly $100 to $225 — real money in the arithmetic, but nowhere near enough to cross into a different $5,000 rounding bracket. Both single-filer figures round down to $90,000. Both joint-filer figures round down to $180,000, which is what the IRS published. To land on the next step up, $95,000 single or $190,000 joint, the unrounded number would have needed to come in thousands of dollars higher than either method produces. This particular figure was never in doubt; the October 2025 gap mattered more for other thresholds elsewhere in the tax code where the unrounded number sits closer to a rounding line.

What the shift is worth: two worked examples

The clearest way to see what a $5,000 higher threshold actually does is to run the same borrower’s numbers through both the 2026 and 2027 ranges.

Take a single filer with modified adjusted gross income of $95,000 who paid the full $2,500 in deductible student loan interest for the year. Under the 2026 range, that MAGI sits $10,000 above the $85,000 threshold, out of the $15,000-wide range — a reduction of $2,500 × ($10,000 / $15,000), or $1,666.67, leaving a deductible amount of $833.33. Under the 2027 range, the same $95,000 sits only $5,000 above the new $90,000 threshold: a reduction of $2,500 × ($5,000 / $15,000), or $833.33, leaving a deductible amount of $1,666.67. Moving the threshold up by $5,000 doubles what this borrower can deduct, without their income or their interest paid changing at all.

Now take a married couple filing jointly with combined MAGI of $190,000, also having paid $2,500 in deductible interest. Under the 2026 range, $190,000 sits $15,000 above the $175,000 threshold, out of the $30,000-wide range — exactly halfway through the phase-out, a reduction of $2,500 × ($15,000 / $30,000), or $1,250.00, leaving a deductible amount of $1,250.00. Under the 2027 range, that same $190,000 sits $10,000 above the new $180,000 threshold: a reduction of $2,500 × ($10,000 / $30,000), or $833.33, leaving a deductible amount of $1,666.67.

Both examples land on the identical $1,666.67 figure under the 2027 range, which is a coincidence of these particular income levels rather than a rule — each filer sits at a different point along a differently sized phase-out band, and the two numbers only happen to meet here. Anyone working through their own numbers on the actual Form 1040 instructions worksheet should expect a result within a dollar or so of a hand calculation like this one; the IRS worksheet rounds the phase-out ratio to at least three decimal places at an intermediate step, which can shift the final cents slightly from a calculation carried through in full precision.

The calendar from here

The IRS confirmed the 2026 student loan interest thresholds in Revenue Procedure 2025-32, issued October 9, 2025, and the 2027 thresholds in Revenue Procedure 2026-35, section 3.31, released November 5, 2026: $90,000 to $105,000 for single filers and $180,000 to $210,000 for joint filers. Tax software and loan servicers may keep displaying the 2026 figures until they update. This site’s 2027 IRS inflation adjustments tracker follows the revenue procedure itself, alongside the rest of the figures that share this same CPI window, including the mechanical changes already drafted for the 2026 Form 1040. The mechanics of the deduction itself, from what counts as qualified interest to the 2026 worksheet, are covered in this site’s guide to the student loan interest deduction. Borrowers whose employer pays part of their loans should know that interest paid through a section 127 educational assistance program is excluded from income and cannot be deducted a second time; that tax-free employer cap rises with inflation for the first time in 2027, from $5,250 to $5,400. For borrowers weighing this deduction against other loan-related decisions, the loans hub collects the rest of this site’s coverage of student loan repayment, refinancing and interest mechanics in one place.

Sources

• 26 U.S.C. § 221 — law.cornell.edu/uscode/text/26/221
• 26 U.S.C. § 1(f)(3) — law.cornell.edu/uscode/text/26/1
• Rev. Proc. 2026-35, § 3.31 (2027 student loan interest deduction thresholds) — irs.gov/pub/irs-drop/rp-26-35.pdf
• IRS news release IR-2026-133, November 5, 2026 — irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2027-taxpayers-continue-to-benefit-from-the-working-families-tax-cuts
• Rev. Proc. 2025-32, § 4.29 (2026 student loan interest deduction thresholds) — irs.gov/pub/irs-drop/rp-25-32.pdf
• Bureau of Labor Statistics, Chained CPI-U series SUUR0000SA0 — api.bls.gov/publicAPI/v2/timeseries/data/
• finbarrow, IRS 2027 inflation adjustments tracker — companion page for the shared CPI window