Question

1. David is the designated beneficiary of a 529 plan. This year, he took a distribution of $10,000 from the plan to pay down his student loan ($9,500 in principal and $500 interest). This is the only payment he made on his student loan this year. He received a Form 1098-E showing $500 in student loan interest paid. How much may David deduct on his tax return this year?

A. $0

B. $250

C. $500

D. $1,000

2. Which of the following taxpayers will be required to file a 2020 federal income tax return?

A. Cayson (58), head of household, gross income $17,100.

B. Glenn (72) and Darlene (68), married filing jointly, gross income $26,650.

C. Aston (72) and Ashlee (63), married filing jointly, gross income $25,150.

D. Halima (72), married filing separately, gross income $11,200.

Answer 1

1) The correct option is C) $500

Student loan interest is interest you paid during the year on a qualified student loan. It includes both required and voluntarily pre-paid interest payments. You may deduct the lesser of $2,500 or the amount of interest you actually paid during the year.

2) The correct answer is A) Cayson (58), head of household, gross income $17,100 because

you don't need to file a tax return if all of the following are true for you:

• Under age 65
• Single
• Don't have any special circumstances that require you to file (like self-employment income)
• Earn less than $12,200 (which is the standard deduction for a single taxpayer)

But the option chosen doesn't meet with this criteria, So he need to file the return.