Years ago, Kim took out a student loan for $80,000 to pay her college tuition. She graduated and began making payments on her student loan. In 2018, Kim made 12 payments of $4,500, which included $1,900 of interest and $2,600 of principal. How much is Kim’s student loan interest deduction? Her AGI is $70,000 for the year.
To qualify for student education loan interest kim must meet certain conditions which are as follows:
1. The loan must be taken for higher education purpose. In this case it is for graduation which is higher secondary level.
2. The loan payments must be made by the student himself/herself and not parents.Kim makes the payment himself.
3. Income of the assessee should be less than $80,000 individually and $1,60,000 jointly. In this case it is $70,000 which is less than $80,000.
All the above conditions are satisfied so kim is eligibile for student loan interest as follows:
Deduction can be claimed from LEAST of the two:
1. $2,500 annually (or)
2. Actual amount paid.
In the present case it is $2500 or $1900
Therefore kim can claim a deduction of $1,900 for the year 2018 as student loan interest deduction.
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