Case Study 6: Determining the Deduction
Here is how a volunteer helped Brenda determine if she can take the deduction for her student loan interest.
| Volunteer Says… |
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Brenda Responds… |
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| In reviewing your intake and interview sheet, I see you did not indicate if you had any educational expenses. Did you pay any student loan interest this year? |
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Yes, I just graduated a year ago and I'll be paying those loans for a while. |
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| Well, you might be able to take a deduction for that. You are filing as Single and your income before adjustments is not more than the limit for your filing status. Can you show me a statement from the lender? |
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I have two loans, here are the statements. |
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| The interest amounts add up to $2,600. Now, if your interest payments qualify for the deduction, the most we can claim is $2,500. Do you have any questions about that? |
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No, I understand. |
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| I just need to ask a few questions to see if you qualify, okay? Earlier we decided that you cannot be claimed as a dependent on someone else's return, so that's no problem. Can you tell me what you used the loan to pay for? |
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My tuition and fees, and my books. |
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| Did you receive any educational assistance, like from your employer or the Veteran's Administration? |
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No. |
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| How about tax-free withdrawals from a Coverdell educational savings account, another qualified tuition program, or from U.S. savings bonds? |
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No, none of those. |
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| Did you get any other nontaxable payments, not counting gifts, bequests, or inheritances, which were specifically for educational expenses? |
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Heavens no, I wish I had! |
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| It looks like you can claim the maximum deduction of $2,500. |
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| [Indicate on the intake and interview sheet whether Brenda is eligible for this adjustment.] |
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