Question

.Provide an example of an exemption or deduction that narrows the U.S. tax code. Provide an explanation for this policy.

Answer 1

One of the deductions in US Tax code is Student Loan Interest.

For example, a $2500 exemption or deduction reduces a filer’s taxable income by $2500. It reduces the filer’s taxes by a maximum of $2500 multiplied by the tax rate the filer would have faced on that $2500 in income. Since current income tax rates range from 0 percent to 37 percent, a $100 exemption or deduction reduces a filer’s taxes by between $0 and $37.

The deduction is given on student loan to help the students from the burden of paying taxes on loans.