Yulia

2021-08-21

The tax saving due to federal deduction on interest paid for the student loan.

Given: The modified adjusted gross income is $70000.

The interest paid on student loan is $3000.

Given: The modified adjusted gross income is $70000.

The interest paid on student loan is $3000.

liannemdh

Skilled2021-08-22Added 106 answers

Concept used:

The benefit offered by the state or local government of the revenue service for certain specific expenditure such as college or tuition fees is federal tax deduction.

It reduces the income tax as it reduces the taxable income.

Write the expression for tax saving.

Tax saving

Here, the allowed deduction is D.

Calculations:

The table for federal tax deduction for student loan is shown below.

Table (I)

The maximum deduction of $2500 for the year phase out for single filers for the modified adjusted gross income between

The allowed deduction will reduce to one-third of the maximum deduction because modified adjusted gross income is two-third way through the phase bracket.

Allowable deduction

Calculate the tax saving.

Substitute $833 for D and

Tax saving

The tax saving due to federal deduction on interest paid for student loan is $208.

Conclusion:

The tax saving due to federal deduction on interest paid for student loan is $208.