This Year Riley Files Single and Reports Modified AGI of $71,000

This year Riley files single and reports modified AGI of $71,000. Riley paid $1,200 of interest on a qualified education loan. What amounts can Riley deduct for qualifying education interest?

A) The deduction for qualifying education interest is $1,200.
B) The deduction for qualifying education interest is $1,000.
C) The deduction for qualifying education interest is $720.
D) The deduction for qualifying education interest is $200.
E) None of the abovE.Riley may deduct the amount paid ($1,200) up to $2,500, reduced by the phase-out amount.The phase-out amount is the amount paid up to $2,500 ($1,200 for Riley) multiplied by 40% [71,000 - 65,000]/15,000 = 40%.Hence, Riley may deduct $720 [$1,200 - [$1,200 × 40%] = $720].

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