Question

Which of the following statements regarding the qualified education interest deduction is correct?

a) the deduction may only be claimed by the taxpayer legally obligated to make the loan payments.
b) the maximum deduction of $5,000 may be taken by a married taxpayer filing jointly with $200,000 of magi.
c) the deduction may only be taken as an itemized deduction.
d) the maximum deduction of $2,500 may be taken by a married taxpayer filing jointly with $200,000 of magi.

Answer 1

The correct answer is that the maximum deduction of $2,500 for qualified education interest can be claimed by a married taxpayer filing jointly with a MAGI of $200,000, although it may phase out at higher income levels.

Step-by-step explanation:

The deduction for the interest paid on a student loan is designed to help reduce the cost of borrowing for higher education. The Internal Revenue Service (IRS) allows taxpayers to deduct up to $2,500 of the interest paid on qualifying student loans from their taxable income. However, the ability to claim this deduction is subject to income limits and phases out at higher income levels.

The deduction may be claimed by anyone who is legally obligated to pay the interest on the loan, not just the student. Therefore, statement a) is incorrect. Also, it is not necessary to itemize deductions to take this benefit, meaning statement c) is incorrect. Statement b) is incorrect because the maximum deductible amount is $2,500, not $5,000, and the deduction may phase out for higher income levels, such as $200,000 for a married couple filing jointly.