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Savatey [412]
2 years ago
13

Tam attended Brown University during 2016–2020. She lived at home and was claimed by her parents as a dependent during her entir

e education. She incurred education expenses of $10,000 during college, of which $2,000 was paid for by scholarships. To finance her education, she borrowed $6,000 through a federal student loan program and borrowed another $4,000 from a local lending institution for educational purposes. After graduation, she married and moved with her spouse to a distant city. In 2021, she incurred $600 of interest on the federal loans and $400 on the lending institution loan. She filed a joint return with her spouse showing modified AGI of $132,000.
Required:
What amount of student loan interest can Tam and her spouse deduct in 2021, if any?
Business
1 answer:
MakcuM [25]2 years ago
5 0

The amount of student loan interest that Tam and her spouse can deduct in 2021 is <u>$800</u>.

<h3>What is a qualified student loan?</h3>

A “qualified education loan” is student loan incurred for qualified higher education expenses. A private student loan is a student loan partially outside the cost of attendance to a particular educational institution.  Only qualified education loans attract deduction of interest from tax.

According to the IRS guidelines, the maximum qualified student loan interest for 2021 is $2,500.

<h3>Data and Calculations:</h3>

Tam's education expenses = $10,000

Scholarships = $2,000

Federal student loan = $6,000

Local lending institution = $4,000

Interest in 2021 on federal student loan = $600

Interest in 2021 on local lending = $400

The interest rate = 10% ($600/$6,000 x 100) or ($400/$4,000 x 100).

Non-qualified loan = $2,000 paid by scholarships

Interest on non-qualified loan = $200 ($2,000 x 10%)

Total deductible qualified student loan interest = $800 ($600 + $400 - $200)

Modified AGI with spouse = $132,000

Thus, the amount of student loan interest that Tam and her spouse can deduct in 2021 is <u>$800</u>.

Learn more about deductible student loan interest at brainly.com/question/12146314

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