Key Takeaways

• For years when you pay $600+ in student loan interest, you can write it off as a personal expense
• The maximum amount you can write off is $2,500
• The write-off phases out when your modified adjusted gross income (MAGI) is $85,000 or more

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Student loan payments are a pain. 

You worked hard to get an education, get your license, and launch your own private practice. But you still have to scrape together enough cash each month to pay down your student loan debt—even if that debt barely seems to have shrunk at all since you left school.

Here’s how to take (some of) the sting out of your student loan payments through the magic of tax deductions.

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Can therapists deduct 100% of their student loan payments?

Bad news: Student loan payments are not 100% deductible. 

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However, you may be able to deduct a portion of your total student loan payments at the end of the year. That portion consists entirely of the interest you pay on your debt. More on that shortly.

Why aren’t student loan payments 100% deductible for therapists?

When it comes to deducting education expenses, there’s one important limitation you need to know about: You can’t deduct the cost of education required in order to start practicing your profession.

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Since your college or university education allows you to meet the minimum licensure requirements for therapists in your state, your tuition is not a deductible business expense.

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That limit extends to your student loan payments. Any money you spend paying down the principal of the loan—the money you borrowed in order to pay your tuition—does not qualify as a tax deduction.

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Another way to think of it: You can only write off business expenses like continuing education once you start running your own therapy practice. When you went to school to become a therapist, by definition you were not running your own therapy practice. So the cost of that education is non-deductible.

Who is eligible to write off student loan interest?

When you write off student loan interest, you write it off as a personal expense, not a business expense.

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To qualify, you must:

1. Be legally obligated to pay interest on a qualified student loan
2. Not be married filing separately
3. Not be claimed as a dependent on someone else’s tax return
4. Have paid over $600 in interest over the course of the year
5. Have a modified adjusted gross income (MAGI) that falls below a particular threshold, which is set annually

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When you make the deduction, you can claim the total amount you paid in interest, or $2,500—whichever is lesser.

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Items 1 – 3 should be self-explanatory. Some more info on 4 and 5:

The $600 threshold

If you pay over $600 in interest on your student loans during the year, you can write that amount off as a business expense.

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Suppose your monthly student loan payments are $460 each. Of that, $400 goes toward paying down the principal. The other $60 is interest. You pay twelve months of the year, and 12 * 60 = $720. So you can deduct that $720 as a personal expense.

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On the other hand, if your monthly payments are $330, with $300 paying down the principal and $30 consisting of interest, you can’t write off the interest as a personal expense. (Because 12 * 30 = $360, which is $240 shy of the $600 threshold.)

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Not sure how much you paid in student loan interest last year? No worries—your lender will tell you. More on that in the next section.

The MAGI threshold

If your MAGI is above a certain threshold, the student loan write-off begins to phase out.

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For the 2025 tax year, the threshold for individual filers is $85,000 to $100,000. Meaning, if your MAGI is over $85,000, the amount you are able to deduct begins to decrease; if your MAGI is over $100,000, the write-off is eliminated altogether.

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The MAGI threshold changes from year to year, and if your earnings are above that threshold, you’ll need to do some arithmetic to determine how much you can deduct. For more information, check out IRS Publication 970.

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Calculating your MAGI for the student loan interest deduction

Your MAGI is your adjusted gross income (AGI) from line 11 of Form 1040 (your personal tax return) with certain deductions added back onto it.

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There are a number of tax credits, deductions, and other benefits which, in order for you to qualify for them, require you to calculate your MAGI. How you do so differs for each benefit.

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For the student loan interest write-off, you calculate your MAGI by adding to your AGI:

• Any income received from your home territory that you did not include on your return because you are a resident of American Samoa or Puerto Rico
• Foreign earned income and housing excluded from your income
• The foreign housing deduction (if you have claimed it)

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If none of these points apply to you, your MAGI is the same as your AGI.

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For a more detailed breakdown, refer to the IRS page for calculating MAGI. Note that this particular page is not always up to date with the latest MAGI thresholds. To find the threshold that applies to you, see IRS Publication 970.

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How to deduct student loan interest on your tax return

If you paid over $600 in interest on your student loans over the course of the year, your lender will send you a copy of IRS Form 1098-E (Student Loan Interest Statement).

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If you qualify to receive this form, the lender must mail it to you no later than January 31st (or the next business day if January 31st falls on a weekend).

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The total amount of interest paid listed on this form is what you deduct on your personal tax return.
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You list the deduction on Form 1040, Schedule 1, Line 21:

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Can my business pay my student loan?

You may be wondering whether your S corp or LLC can pay off your student loan for you.

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A company that sets up a Student Loan Assistance Program for its employees can pay up to $5,250 of each employee’s student loan debt per year. The amount the company spends paying off student loans under one of these programs is tax deductible.

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If your therapy practice is an S corporation, or if you’re planning to turn it into one, you may be asking yourself: Why don’t I just set up a Student Loan Assistance Program, use it to cover my student loan payments, and write it off my S corp’s taxes?

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Sadly, that won’t work.

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A Student Loan Assistance Program is only available to regular employees, not shareholder employees. As the owner of your business, you’re de facto a shareholder in the S corporation, so you don’t qualify.

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How does an income-driven repayment (IDR) plan affect self-employment taxes?

If your student loan is part of an income-driven repayment (IDR) plan—including income-based repayment (IBR), income-contingent repayment (ICR), and the repayment assistance plan (RAP)—your student loan payments are calculated as a percentage of your income.

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However, as a self-employed therapist, your income fluctuates from one year to the next. Here are some strategies to manage student loan payments when you run your own practice.

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Heads up: Many borrowers are enrolled in SAVE plans. However, SAVE became defunct in 2025, and enrollees are being encouraged to switch to new plans. In 2028, all SAVE borrowers will be automatically migrated to RAP plans. For details, see Student Loan Forgiveness Programs for Therapists.  

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Student loan payments when your income decreases 

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Typically, your IDR payments are based on your most recent tax return.

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That can be a problem in the current year if your income suddenly takes a dive.

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Here’s an example: 

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Filing taxes for 2024, you report a total income of $70,000. In 2025, your student loan payments are based on that income.

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But early in 2025 a medical issue forces you to take two months off work. Not only do you lose the income you would have earned in that time, but several clients leave. Your monthly income for the rest of the year will be reduced.

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In fact, based on projections, your total income for 2025 will be about $55,000.

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Now you’re stuck making student loan payments based on an income of $70,000—the amount you earned in 2024—when in the present year (2025) you’re earning significantly less than you did then.

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In order to reduce your payments for the present year, you need to write your lender an income-verification letter.

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How to write an income verification letter

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You can request to have your student loan payments based on your current income, and not the previous year’s tax return, by verifying your current income.

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If you were receiving regular paychecks from an employer, you might be able to submit copies to your lender in order to verify your income. But since you’re self-employed, it’s a bit more difficult to prove how much you earn. 

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You need to write your lender an income-verification letter proving the amount you are earning now is less than the amount you were earning last year.

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Here’s how to do it:

1. Call your lender. If you get in touch with a representative from your lender, they should be able to tell you the information they need in the income verification letter. They can also tell you where to send it—whether electronically or by mail—and the typical timeline for approval.
2. Draft and send the letter. Be sure to include any additional documentation your lender requests.
3. Resubmit as needed. You may need to submit a letter more than once. Sometimes lenders are inconsistent when it comes to the information they request. If your letter is rejected due to missing information, draft a revised version and submit it as soon as possible.

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Exact requirements differ from one lender to the next, but most income verification letters should include:

• Your business name
• Your occupation
• How you are paid by clients
• How often you receive income (owner’s draws)
• Your expenses for the previous pay period
• Your total revenue for the previous pay period

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Don’t be afraid to follow up with your lender if you have any questions. You may need to work closely with them to verify your income and have your student loan payments adjusted.

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Student loan payments when your income increases

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When your income increases in the current year, but your student loan payments are based on last year’s earnings, that’s a good thing. 

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For instance, if your income in 2025 was $70,000, but you’re on track to earn $85,000 in 2026, your loan payments in 2026 will be smaller relative to your total revenue—giving you extra cash to work with.

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But once you file your 2026 taxes, you can expect those loan payments to increase.

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So long as your earnings in 2027 are similar to what you earn in 2026, that shouldn’t be a problem. But with variable income, it’s always a good idea to prepare for the worst:

• Set aside savings now. Use some of the extra funds you save from lower payments in the current year to build an emergency savings fund. If your income decreases in the future, it can help you cover the cost of payments until you’re able to verify your income with the lender.
• Adjust your pay. If your practice is an S corporation, you pay yourself a reasonable salary by running payroll. Lowering your salary for the present year can lower your loan payments in the year to come (since your payment amounts are based on your personal income). It can also reduce the amount you pay in self-employment taxes. 
• Keep expenses under control. When your earnings increase, it’s tempting to put some of that revenue towards new business expenses—like office upgrades, extra software subscriptions, or marketing experiments. A carefully managed therapy practice budget helps you avoid expense creep and set aside savings. 

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Salary adjustments and the qualified business income (QBI) deduction

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If your practice has elected S corp status, lowering your salary reduces your student loan payments under an IDR plan. It also reduces the amount you pay in self-employment tax.

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There’s another benefit to giving yourself a pay cut: A bigger qualified business income (QBI) deduction. The QBI deduction allows your practice to write off up to 20% of your practice’s income. Since your salary is a business expense, a lower salary results in more income for your business, which in turn means a larger QBI deduction.

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Because there are so many benefits to cutting yourself a small paycheck, the IRS is on the lookout for S corp owners who underpay themselves. You need to be sure you earn a reasonable salary, or else you could come under IRS scrutiny.

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Setting your salary is a tricky balancing act, and best done with input from an accountant. To get started, check out How to Calculate a Reasonable Salary as an S Corp Therapist. 

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Do you have to pay taxes on student loan forgiveness?

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As of 2026, if your student loan is forgiven, the amount forgiven is taxed as regular income for the year in which your loan is discharged.

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If your loan is part of an IDR program, your student loans will eventually be discharged 20, 25, or 30 years after you take out the loan (depending on the program).

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Typically, that means a sudden spike in income tax for the year in which your loan is discharged. The amount forgiven is treated as regular income. 

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Example: 

• You took out a $90,000 IDR student loan in 2001 on a 25-year forgiveness plan.
• It is now 2026. In total, you have paid back $70,000, with $20,000 remaining on the loan.
• The loan is discharged. You don’t need to pay the remaining $20,000, but it’s taxed as regular income for the 2026 tax year. (Your lender issues you a Form 1099-C reporting the amount forgiven.)
• Your regular taxable income for 2026 is $90,000. However, with the discharge of your loan, you will pay income tax on $110,000 ($90,000 + $20,000).

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Tax treatment of student loan forgiveness has varied in recent years:

• Until 2021, cancelled loans were taxed as regular income.
• In 2021, the American Rescue Plan Act was passed, which exempted most forms of IDR loan forgiveness from federal taxation.
• The American Rescue Plan Act expired on January 1st, 2026. Any loans forgiven after that date are subject to taxation.

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If you’re currently paying down an IDR loan, make a note of the year when it will be discharged. As that year approaches, make plans to set aside savings to cover the increase in income tax.

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How to write off other education expenses 

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The education expenses you can write off as a business owner aren’t limited to student loan interest. There are a number of expenses related to your education as therapist that you can write off your taxes, including:

• Seminars or workshops that help you upgrade your skills as a therapist
• Educational materials like books, videos, or recordings
• Professional conferences

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For a deeper dive, check out our article What Therapists Need to Know About Deducting Education Expenses.

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Looking for more ways to lower your bill this tax season? Check out our complete list of tax deductions for therapists.

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Summary

• Track your student loan interest payments—if the total amount is $600+, you can write it off as a personal expense (up to $2,500)
• The student loan interest deduction begins phasing out once your income reaches $85,000, and it’s eliminated entirely for income $100,000+
• If your practice is an S corporation, you unfortunately cannot take advantage of the Student Loan Assistance Program for employees (because you are the S corp’s owner)
• When you have an IDR loan and your income is variable, it’s important to plan carefully for increases or decreases in earnings that could affect your payments
• As of 2026, the amount forgiven through an IDR plan when a loan is discharged is treated as taxable income

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Looking for more ways to lower your bill this tax season? Check out our complete list of tax deductions for therapists.

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Visit our Therapist Tax Center and Tax Deductions for Therapists Hub for everything you need to know about taxes as a practice owner. If you're just starting out, here's everything you need to know about How to Start a Private Practice as a Therapist.
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This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult their own attorney, business advisor, or tax advisor with respect to matters referenced in this post.‍

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Bryce Warnes is a West Coast writer specializing in small business finances.

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