Answer:
The correct answer is $1,056.
Explanation:
According to the scenario, the computation of the given data are as follows:
If AGI is less than $70,000 than maximum deduction = $2,500
Then the second Phase is start at $70,000 and ends at $85,000.
Modified AGI = $74,000
Interest on loan = $1,440
So, we can calculate the amounts Lionel can deduct for interest on higher-education loans by using following formula:
Deduction for Interest = Total interest paid - Amount disallowed
Where, Amount disallowed = ($74,000 - $70,000) ÷ ($85,000 - $70,000) × $1,440
= ($4,000) ÷ ($15,000) × $1,440
= $384
So, by putting the value, we get
Deduction for Interest = $1,440 - $384
= $1,056
