This year Riley files single and reports modified AGI of $71,000. Riley paid $1,200 of interest on a qualified education loan. What amounts can Riley deduct for qualifying education interest?
A) The deduction for qualifying education interest is $1,200.
B) The deduction for qualifying education interest is $1,000.
C) The deduction for qualifying education interest is $720.
D) The deduction for qualifying education interest is $200.
E) None of the choices are correct.

Question

Quizplus · Accepted Answer

Riley may deduct the amount paid ($1,200) up to $2,500, reduced by the phase-out amount. The phase-out amount is the amount paid up to $2,500 ($1,200 for Riley) multiplied by 40% [71,000 − 65,000] ÷ 15,000 = 40%]. Hence, Riley may deduct $720 [$1,200 − [$1,200 × 40%] = $720.

This Year Riley Files Single and Reports Modified AGI of $71,000