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https://newconnect.mheducation.com/flow/connect.html Saved Help Save& Exit Check my w 0 Required information The following information applies to the questions displayed below.] This year Jack intends to file a married-joint return with two dependents. Jack received $168,600 of salary and paid $6,950 of interest on loans used to pay qualified tuition costs for his dependent daughter Deb. This year Jack has also paid qualified moving expenses of $5,550 and $28,000 of alimony. (Do not round intermediate calculations. Round your final answer to the nearest whole dollar amount.) a. What is Jack\'s adjusted gross income? Assume that Jack will opt to treat tax items in a manner to minimize his AGI. Jack\'s AGI Prey 5 6 7 of 19 … Scoreanswer >

Solution

Ans) AGI is $132971. Jack\'s modified AGI calculated without adjustment for educational interest expense is$135050. He is allowed to deduct part of his student loan interest because his modified AGI is not above 160,000. Jack\'s maximum deduction before phase out is $2500. The maximum deduction of $2500 is phased out ratably over a $30,000 range beginning with modified AGI over $130,000. Cosequently, Jack\'s educational interest expense deduction is $2079. (2500 - $2500 * [($135050 - 130,000 / 30000)].

Jack\'s AGI is computed as follows:

Salary and gross income = 168600

Less: Alimony = (28000)

Moving expense deduction = (5,550)

Modified AGI = 135050

Less Student loan interest deduction = (2079)

AGI = 132971

If your MAGI is under the threshold where the phase-out begins, you can deduct up to $2,500 in student loan interest or the actual amount of interest you paid, whichever is less. Your limit is prorated if your MAGI falls within the phase-out range. The IRS explains how to calculate the reduced student loan interest deduction:

\"If your MAGI is within the range of incomes where the credit must be reduced, you must figure your reduced deduction. To figure the phase-out, multiply your interest deduction (before the phase-out, but not more than $2,500) by a fraction. The numerator is your MAGI minus $65,000 ($130,000 in the case of a joint return). The denominator is $15,000 ($30,000 in the case of a joint return). Subtract the result from your deduction (before the phase-out) to give you the amount you can deduct.\"