Question

Grace is a single medical student at State University, a qualified educational institution. This year Grace paid university tuition of 12,000. Grace works part-time at the University library, and this year she reports15,000 of salary and no other items of income or expense. Which of the following is a true statement?

A. Grace can deduct her entire tuition of $12,000 as a business expense.
B. Grace cannot deduct any tuition expenses because she is a part-time employee.
C. Grace may be eligible for the tuition and fees deduction, subject to certain income limitations.
D. Grace is not eligible for any tax benefits related to her education expenses.

Answer 1

Grace may be eligible for the tuition and fees deduction, subject to income limitations. She cannot deduct tuition as a business expense and her part-time job does not affect her eligibility for educational deductions. Current tax law should determine her specific qualification for these benefits.

Step-by-step explanation:

Regarding the question of whether Grace can deduct her tuition as a business expense, given her status as a single medical student and part-time employee, the accurate statement is: C. Grace may be eligible for the tuition and fees deduction, subject to certain income limitations.

The tuition and fees deduction allows qualifying students to reduce their taxable income by up to $4,000 for tuition and certain related expenses paid during the tax year. However, this deduction is subject to phase-out at certain income levels and was also set to expire in previous tax years unless extended by Congress. As of the last information available, taxpayers can't claim this deduction for tax years after 2020, so Grace would need to consult the latest tax law updates or a tax professional for the current year's eligibility and rules.

Grace cannot deduct her tuition as a business expense (statement A) since business expenses are typically for costs incurred in the operation of a business, not personal educational expenses. Additionally, her part-time employment status does not inherently disqualify her from deducting education expenses (rejecting statement B). Lastly, without additional tax benefits like scholarships, grants, or credits, it would be inaccurate to claim that Grace is not eligible for any tax benefits related to her education expenses (therefore statement D is incorrect).