This year, Jong paid $4,000 of interest on a qualified education loan. Jong files married filing jointly and reports modified AGI of $143,000. What is Jong's deduction for interest expense on an educational loan?
Deduction for interest expense on an educational loan?
Ans:
Explanation:
We should know certain facts regarding Int. Exp. deduction before calculating it.
| (1) |
Maximum Interest Expense DeductionLimit |
$ 2500 |
| (2) |
For, Married Filling Jointly Phase out of AGI |
$135000 - $165000 |
Here, AGI = $143000
Therefore % of phase out:
= ($143000 - $135000) ÷ $30000( Diff. of phaseout limit)
= $ 8000 ÷$30,000
= 0.266666666
Deduction For Interest Expense:
= $2500 × ( 1- 0.266666666)
= $2500 × 0.73333
= $1833
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