Question

1. The following information applies to the questions displayed below.] Lionel is an unmarried law student at State University Law School, a qualified educational institution. This year Lionel borrowed $27,500 from County Bank and paid interest of $1,650. Lionel used the loan proceeds to pay his law school tuition. Calculate the amounts Lionel can deduct for higher education expenses and interest on higher-education loans under the following circumstances: (Leave no answer blank. Enter zero if applicable.) a. Lionel's AGI before deducting interest on higher-education loans is $50,000.

what is the the higher education expense and what is the interest deduction?

2. Lionel is an unmarried law student at State University Law School, a qualified educational institution. This year Lionel borrowed $27,500 from County Bank and paid interest of $1,650. Lionel used the loan proceeds to pay his law school tuition. Calculate the amounts Lionel can deduct for higher education expenses and interest on higher-education loans under the following circumstances: (Leave no answer blank. Enter zero if applicable.)

what is the the higher education expense and what is the interest deduction?

c. Lionel's AGI before deducting interest on higher-education loans is $90,000.

Answer 1

All amounts are in $

Tax year is taken as 2020

There are two types of deductions,

Tuition fee deduction : A maximum amount of $4,000 is available as deduction. This will be reduced to $2,000 once the MAGI has crossed $65,000 and is below $8,0000. If the income has crossed $80,000, then no deduction is available.

Interest Expense : A maximum of $2,500 is allowed as deduction. The interest deduction will be phased out once the MAGI has crossed $65,000 and untill it reaches $80,000 and after reaching $80,000 it the interest deduction will be zero.

(a) AGI is $50,000

Interest Expense deduction = 1,650

Higher education expense deduction = $4,000

(c) AGI $90,000

Interest Expense deduction = 0

Higher education expense deduction = 0