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for all eligible students). The result is a $1,320 (20% x $6,600) tentative credit. Because your MAGI is within the range of incomes where the credit must be reduced, you must multiply your tentative credit ($1,320) by a fraction. The numerator (top part) of the fraction is $180,000 (the upper limit for those filing a joint return) minus your MAGI. The denominator (bottom part) is $20,000, the range of incomes for the phaseout ($160,000 to $180,000). The result is the amount of your phased out (reduced) lifetime learning credit ($1,254). $1,320 × $180,000 - $161,000 = $1,254 $20,000 Claiming the Credit You claim the lifetime learning credit by completing Form 8863 and submitting it with your Form 1040 or 1040-SR. Enter the credit on Schedule 3 (Form 1040), line 3. Note. In Appendix A at the end of this publication, there is an example illustrating the use of Form 8863 when both the American opportunity credit and the lifetime learning credit are claimed on the same tax return. 4. Student Loan Interest Deduction What’s New Modified adjusted gross income (MAGI) limits. For 2021, the amount of your student loan interest deduction is gradually reduced (phased out) if your MAGI is between $70,000 and $85,000 ($140,000 and $170,000 if you file a joint return). You can’t claim the deduction if your MAGI is $85,000 or more ($170,000 or more if you file a joint re- turn). For more information, see Figuring the Deduction. Reminder No double benefit allowed You can’t deduct as interest on a student loan any interest paid by your employer after March 27, 2020, and before January 1, 2026, under an educational assistance program. See No Double Benefit Allowed. Introduction Generally, personal interest you pay, other than certain mortgage interest, isn't deductible on your tax return. However, if your modified adjusted gross income (MAGI) is less than $85,000 ($170,000 if filing a joint return), you may be allowed a special deduction for paying interest on a student loan (also known as an education loan) used for higher education. For most taxpayers, MAGI is the adjus- ted gross income as figured on their federal income tax re- turn before subtracting any deduction for student loan in- terest. This deduction can reduce the amount of your income subject to tax by up to $2,500. The student loan interest deduction is claimed as an adjustment to income. This means you can claim this de- duction even if you don't itemize deductions on Sched- ule A (Form 1040). This chapter explains: • What type of loan interest you can deduct, • Whether you can claim the deduction, • What expenses you must have paid with the student loan, • Who is an eligible student, • How to figure the deduction, and • How to claim the deduction. Student Loan Interest Deduction at a Glance This table summarizes the features of the student loan interest deduction. Don't rely on this table alone. Refer to the text for more details. Feature Description Maximum benefit You can reduce your income subject to tax by up to $2,500. Loan qualifications Your student loan: • Must have been taken out solely to pay qualified education expenses, and • Can't be from a related person or made under a qualified employer plan. Student qualifications The student must be: • You, your spouse, or your dependent (as defined later for this purpose); and • Enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential at an eligible educational institution. Limit on modified adjusted gross income (MAGI) $170,000 if married filing a joint return; $85,000 if single, head of household, or qualifying widow(er). Table 4-1. Chapter 4 Student Loan Interest Deduction Page 31