Lewis is an unmarried law student at State University, a qualified educational institution.Last year Lewis borrowed $30,000 and used the proceeds to pay his university tuition. This year Lewis paid $1,500 of interest on the loan. Which of the following is a true statement if Lewis reports $40,000 of salary and no other items of income or expense?
A) Lewis can only deduct $1,000 of the interest on his student loan for AGI.
B) Lewis can only deduct $1,000 of the interest on his student loan as an itemized deduction.
C) Lewis can deduct all the interest on his student loan as an itemized deduction.
D) Lewis can deduct all the interest on his student loan for AGI.
E) All of the choices are false.

Question

Quizplus · Accepted Answer

Under the current tax law, Lewis can deduct up to $2,500 of interest paid on a qualified student loan as an above-the-line deduction, meaning it is deducted from his gross income to arrive at his adjusted gross income (AGI). Since Lewis paid $1,500 of interest on his student loan this year and he has no other items of income or expense, he can deduct this full amount as an above-the-line deduction, which lowers his AGI. Therefore, Lewis can deduct all the interest on his student loan for AGI.

Lewis Is an Unmarried Law Student at State University, a Qualified