Question

Problem 45 Zach attended Champion University during 2013–2017. He lived at home and was claimed by his parents as a deduction during his entire education. He incurred education expenses of $10,000 during college of which $2,000 was paid for by scholarships. To finance his education, he borrowed $7,000 through a federal student loan program and borrowed another $3,000 from a local lending institution for educational purposes. After graduation, he married and moved with his spouse to a distant city. In 2018 he incurred $700 of interest on the federal loans and $300 on the lending institution loan. He filed a joint return with his spouse showing modified AGI of $128,000. What amount of student loan interest can Zach and his spouse deduct in 2018, if any?

Answer 1

Answer:

$800

Explanation:

The amount of student loan interest can Zach and his spouse deduct in 2018:

Education expenses:

= Incurred expenses - Scholarship

= $10,000 - $2,000

= $8,000

⇒ $\frac{8,000}{10,000}\times100$

= 80%

Interest incurred:

= Federal loan interest + Lending loan interest

= $700 + $300

= $1,000

Therefore, the amount of student loan interest can Zach and his spouse deduct in 2018 is = Interest incurred × Education expenses percent

                             = $1,000 × 80%

                             = $800