The Renfros were granted a decree of divorce in 2015. In accordance with the decree, Josh Renfro is to pay his ex-wife $24,000 a year until their only child, Evelyn now 10, turns 18, and then the payments will decrease to $14,000 per year. For 2016, how much can Josh deduct as alimony for the year?
d. None of the above.
Generally, Cindy is permitted to take a for AGI deduction for student loan interest that she pays. She is the person obligated to pay the loan, amounts were actually paid, and she cannot be claimed as a dependent on someone else's tax return for 2016.
However, there is one limitation that applies in this instance. Qualified education expenses must be reduced by the amount of qualified scholarships. Since $2,000 of the total of $10,000 of education expenses was covered by a scholarship, only 80% of her borrowings went for qualified expenses so only 80% of the interest paid ($800) will qualify.
Feedback: The calculation is as follows:
$1,000 X 80% = $800
Cindy's allowed deduction is $800 as her modified AGI of $128,000 is below the $130,000 MAGI threshold for the reduction of student loan interest deductibility for MFJ.