This year,Jong paid $3,000 of interest on a qualified education loan.Jong files married joint and reports modified AGI of $137,000.What is Jong's deduction for interest expense on an educational loan?

Question

Quizplus · Accepted Answer

The deduction for interest expense on an educational loan is limited to a maximum of $2,500 per year. However, this amount is gradually phased out for taxpayers with modified adjusted gross income (MAGI) between $65,000 and $80,000 for single filers and between $135,000 and $165,000 for married filing jointly. Since Jong's MAGI falls within this phase-out range, we need to calculate the reduced deduction using the following formula: 
Maximum deduction - (MAGI - phase-out start)/phase-out range x maximum deduction 
= $2,500 - ($137,000 - $135,000)/$30,000 x $2,500 
= $1,500 
Therefore, Jong's deduction for interest expense on an educational loan is $1,500.

This Year,Jong Paid $3,000 of Interest on a Qualified Education