Question

Mason paid $4,100 of interest on a loan that paid tuition for him to attend a private university this year. How much of this payment can Mason deduct as interest expense on an educational loan if he files single and reports modified AGI of $90,000?

A. $4,100.

B. $4,000.

C. $2,667.

D. $2,000.

E. None of these.

Answer 1

Mason can deduct $2,667 of the interest expense on the educational loan.

Step-by-step explanation:

Mason can deduct $2,667 of the interest expense on the educational loan. The maximum amount of interest expense that can be deducted on an educational loan is $2,500.

However, this limit is reduced if the taxpayer's modified AGI exceeds a certain threshold. For single taxpayers, the phase-out range starts at $70,000 and ends at $85,000. Mason's modified AGI of $90,000 falls within this phase-out range, so his deduction is reduced proportionally.