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 reports $15,000 of salary and no other items of income or expense. Which of the following is a true statement?

A. Grace can deduct all of her tuition for AGI as a business expense.

B. Grace can deduct all of her tuition as a miscellaneous itemized deduction.

C. Grace can only deduct half of her tuition for AGI as a business expense.

D. Grace can only deduct half of her tuition as a miscellaneous itemized deduction.

E. All of these are false.

Answer 1

Grace is not able to deduct her tuition as a business expense or as a miscellaneous itemized deduction. E. All of these are false is the correct answer, as tuition may only qualify for an education credit or adjustment to income.

Step-by-step explanation:

The statement regarding Grace, a medical student at State University, paying university tuition of $12,000 and having a salary of $15,000, presents several options for deductions. The correct statement is E. All of these are false. Grace cannot deduct her tuition for adjusted gross income (AGI) as a business expense because tuition expenses are not considered business expenses for students.

Nor can she deduct her tuition as a miscellaneous itemized deduction, as tuition and fees may qualify for education credits or as an adjustment to income if certain requirements are met, not as a miscellaneous itemized deduction. Without additional specifics, neither of these options, as presented, would be applicable to her situation.

She could, however, qualify for the American Opportunity Tax Credit or Lifetime Learning Credit if she meets the requirements. Option E