Question

This year, Jong paid $3,000 of interest on a qualified education loan. Jong files married joint and reports modified AGI of $142,000. What is Jong's deduction for interest expense on an educational loan?

A. $2,500.

B. $3,000.

C. $1,500.

D. $1,000.

E. None of these.

Answer 1

The deduction for interest expense on an educational loan is determined by the Modified Adjusted Gross Income (MAGI) of the taxpayer. In this case, Jong's deduction would be $2,500 since the MAGI is $142,000.

Step-by-step explanation:

The deduction for interest expense on an educational loan is determined by the Modified Adjusted Gross Income (MAGI) of the taxpayer. In the case of Jong, who files married joint and reports a MAGI of $142,000, the deduction is gradually phased out.

If the MAGI is below $140,000, the maximum deduction is $2,500. For every $1,000 that the MAGI exceeds $140,000, the deduction is reduced by $100.

Since Jong's MAGI is $142,000, which is $2,000 above $140,000, the deduction is reduced by $200. Therefore, the correct answer is A. $2,500. Jong's deduction for interest expense on an educational loan is $2,500.