Final answer:
Marsha and Jeff cannot deduct Josh's tuition and fees payments directly, as tuition and fees deductions were discontinued after 2020. They can, however, explore the American Opportunity Tax Credit (AOTC) or the Lifetime Learning Credit (LLC), although their modified AGI places them in the phase-out range of benefits.
Step-by-step explanation:
Marsha and Jeff are interested in knowing how much of Josh's $5,000 tuition and fees payments they can deduct for the current year, given that their modified Adjusted Gross Income (AGI) is $100,000 and they are claiming Josh as a dependent. Unfortunately, tuition and fees deductions were available up to the tax year 2020. For tax years beginning after 2020, they are no longer available. Instead, Marsha and Jeff may explore other tax benefits related to education expenses, such as the American Opportunity Tax Credit (AOTC) or the Lifetime Learning Credit (LLC), if they meet the eligibility criteria.
Under the American Opportunity Tax Credit, for example, they might be eligible for up to $2,500 per student for the first four years of higher education if their modified AGI is less than $90,000 ($180,000 for joint filers). However, with a modified AGI of $100,000, they fall into the phase-out range of the credit. As for the Lifetime Learning Credit, they could potentially claim a credit of up to 20% of the first $10,000 of qualified education expenses, phased out for incomes above specified threshold amounts. That said, they should consult a tax professional or use current tax software to determine the exact credit amount they can claim based on their specific situation.