Marcia, who is single, finished graduate school this year and began repaying her student loan. The proceeds of the loan were used to pay her qualified higher education expenses. She has not received any type of educational assistance or scholarships. The amount of interest paid during the year amounted to $3,000. What is the amount and classification of her student loan interest deduction if her AGI is $68,000?

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Quizplus · Accepted Answer

The student loan interest deduction is phased out for taxpayers with AGIs above certain levels. For single filers, the phase-out begins at $70,000. Marcia's AGI is $68,000, so she is eligible for the full $2,500 deduction. However, the deduction is limited to the amount of interest paid during the year, which is $3,000. Therefore, Marcia's student loan interest deduction is $2,000.

Marcia, Who Is Single, Finished Graduate School This Year and Began