Arthur files a single income tax return and his maximum tax-free interest under the education savings bond program is $6,000. How much of the interest is excludible if his modified adjusted gross income exceeds the applicable dollar limit by $5,000 (one-third of the phaseout range)?.

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04-01-2022
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Arthur files a single income tax return and his maximum tax-free interest under the education savings bond program is $6,000. How much of the interest is excludible if his modified adjusted gross income exceeds the applicable dollar limit by $5,000 (one-third of the phaseout range)?.

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anthougo anthougo · Answer 1 · 2022-01-12T13:20:43+01:00

Since Arthur's modified adjusted gross income exceeds the applicable dollar limit by $5,000, the excludable interest is only $1,000.

Data and Calculations:

Education savings bond program's maximum tax-free interest = $6,000

Excess of modified adjusted gross income = $5,000

Conditions for Excludable Interest:

1) Arthur should have paid “qualified” higher education expenses (as defined by the IRS) for himself.

2) Arthur should have a single filing status.

3) Arthur should have an adjusted gross income that does not exceed the phase out rules.

Thus, since Arthur's modified adjusted gross income exceeds the applicable dollar limit by $5,000, the excludable interest is $1,000 ($6,000 - $5,000).

Learn more about excludable interest under the education savings bond program here: https://brainly.com/question/1442514 and https://brainly.com/question/9175572