Question

Tarek’s job is going great, and this past year he decided to work part-time so that he could go to school full-time for his master’s degree. Tarek went to a highly ranked school, where tuition and fees were $15,000 for the year. He paid for his tuition and fees using a combination of savings, current income, scholarships, employer-provided tuition assistance, and student loans. It is the end of the year, and Tarek is filing his tax return. His total income and benefits are as follows:

• Wages: $30,000 (as reported on his W-2).

• Employer-provided tuition assistance: $5,000.

• Scholarship: $2,000.

• Student loan proceeds: $5,000.

In addition to tuition, Tarek had the following expenditures:

• Student loan interest: $1,000 (as reported to Tarek by his lender on Form 1098-E).

• Books: $1,000.

• Rent: $8,000.

• Federal income taxes withheld: $4,000 (as reported on his W-2).

It is now time for Tarek to complete his tax return. Tarek is single and is 26 years old.

Instructions

(You may also want to reference IRS Publication 970.)

1. What is Tarek’s filing status and standard deduction amount for the tax year?

2. Which of the following income items, and what amount, are reported on Tarek’s Form 1040 tax return?

1. Wages.

2. Employer-provided tuition assistance.

3. Scholarship.

4. Student loan proceeds.

3. What education tax credits is Tarek eligible to claim?