13 Education Planning

Question 1

Ryan and Francine paid $3,250 in student loan interest on their subsidized and unsubsidized Federal Stafford Loans in 2023. The couple has an AGI of $162,500 and files Married Filing Jointly (MFJ).

Identify the student loan interest deduction available to Ryan and Francine.

Answer 1

The student loan interest deduction applies to qualified educational loans, including:

Subsidized Federal Stafford Loan
Unsubsidized Federal Stafford Loan
Federal Perkins Loan
Federal Grad PLUS Loan
Federal Parent PLUS Loan
Federal Consolidation Loan
State Education Loans
Private Student Loans
A maximum $2,500 deduction is available on student loan interest in 2023, subject to phaseouts.

For single, head of household or a qualifying widow(er), the student loan interest phase-out starts at $75,000 modified AGI and the phase-out ends at $90,000.

The phaseout range for MFJ in 2023 is $155,000 - $185,000.

Ryan and Francine’s AGI of $162,500 falls within the phaseout range for MFJ taxpayers.

The reduced deduction amount is calculated as follows:

[($185,000 - $162,500) ÷ $30,000] × $2,500 = $1,875

Question 2

Rollovers may be made without penalty from a section 529 tuition account to a section 529A ABLE account if

Answer 2

Rollovers may be made without penalty from a section 529 tuition account to a section 529A ABLE account if the beneficiary of the ABLE account is the designated beneficiary of the tuition account or is an eligible member of the family.

Question 3

Coverdell ESAs

Answer 3

-beneficiary may receive tax-free distributions, for “qualified education expenses” at any elementary or secondary school (grades K-12), or at any qualified accredited post-secondary school in the U.S.
-Contributions must be made prior to the beneficiary attaining age 18.
-The annual contribution limit is $2,000 per beneficiary, regardless of the number of individuals contributing to the account.
-Contributions are treated as non-taxable gifts.