Question

Lionel is an unmarried law student at State University Law School, a qualified educational institution. This year Lionel borrowed $30,000 from County Bank and paid interest of $1,800. Lionel used the loan proceeds to pay his law school tuition. Calculate the amounts Lionel can deduct for interest on higher-education loans under the following circumstances:

a. Lionel's AGI before deducting interest on higher-education loans is $50,000.

Deductible interest expense:

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

Deductible interest expense:

Answer 1

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a)The maximum interest deduction is the amount paid up to $2,500. The deduction is phased out as AGI exceeds $60,000 (before applying the interest deduction). Consequently, because his AGI is below the trigger amount for the phase-out, Lionel can deduct $1800, which is the lesser of (1) $2,500 or (2) $1800 (the amount of interest expense he paid). Lionel paid $30000 of qualified educational expenses. Because his modified AGI ($50,000 - $1800 deduction for interest on higher education loan = $48,200) is less than the trigger for the deduction for qualified education expense phase-out ($65,000), Lionel can deduct $4,000 for qualified education expenses, which is the lesser of (1) $4,000 or (2) $30000 (qualified education expenses paid)

b)deductible internet expense =$0

Lionel modified AGI =AGI-Interest=$90000-$1800=$88200

in 2019 the deduction will be unavailable to you if your modified AGI is higher than$85000 for single .so, Lionel is not allowed to deduct any qualified education expense because the modified AGI exceeds $85000