 Income tax 2023-2024 Student loan interest deduction tax software example Get ready and some coffee So we can lessen the sting from the IRS smack With income tax preparation 2023-2024 First, a word from our sponsor Actually, we're sponsoring ourselves on this one Because apparently the merchandisers They don't want to be seen with us But that's okay whatever Because our merchandise is better than their stupid stuff anyways Like our trust me, I'm an accountant product line It's paramount that you let people know that you're an accountant Because apparently we're among the only ones equipped With the number crunching skills to answer society's current Deep complex and nuanced questions If you would like a commercial free experience Consider subscribing to our website at accountinginstruction.com Or accountinginstruction.thinkific.com Here we are in our form 1040 Example problem using LASERT tax software You don't need tax software to follow along But if you have access to tax software It's a great tool to run scenarios with You can also get access to forms Instruction schedules at the IRS website irs.gov, irs.gov Starting at our standard starting point Where we have our tax payer, Adam Taxman Just trying to avoid a dang tax man Living in Beverly Hills 90210 Single filer, no dependence Starting with W-2 income at the 100,000 We then have the standard deduction $13,850 to get to the taxable income $86,150, mirroring that In our income tax formula format The 100,000 to $13,850 to the $86,150 The tax starting at $14,266 Which we see on the second page Of the income tax formula There we have it Alright, so let's go back to the first page And look at our point of focus this time That being online number 10 Adjustments to income from Schedule 1 Let's go to the Schedule 1 That's not the Schedule 1 Here it is, page number 2 This is the additional income and adjustments to income We'll go to page number 2 Part number 2 Which is the adjustments to income We're now focused on the student loan interest Now the student loan interest Is usually fairly straightforward You're probably going to get more questions About the deductibility of student loan interest And so on and so forth And possibly questions about education In general, is it worth it With regards to the benefits that you get With it and taking out student loans And so on and so forth So obviously in a consulting type of situation You might have tax questions Basically about the tax benefits Of things like student loan interest And credits related to education So that's one discussion that could come up Oftentimes if someone is going into Or having a dependent going into Education or thinking about that Obviously when you're looking at student loan interest They wouldn't be getting a benefit To the student loan interest Until possibly they stopped going to school And they might still be going to school But they're paying back the student loan The student loan was to pay for the tuition And other expenses And if it was a qualified student loan Then you might be able to deduct The student loan interest Obviously student loans are a political topic So you have no idea which way it's going to go As to whether or not people will Actually be responsible for paying back Any other student loans You just never know because it's a political football So in any case, but once the student loan Interest in terms of a data input perspective Happens, you're paying back your student loans Then you're typically going to get a documentation For it, which is fairly straightforward Like a 1098E for student loan Interest statement Which will have your information box one Of the student loan interest received Now obviously once they receive student loans If they got a good education Maybe they might be making a lot of money In which case there's a phase out With the student loan So they might not still get the student loans If their income is above a certain threshold So for example, if I jump on over here And let's say that the qualified student loans Let's just put 10,000 Just to put a round number there If I pull it over, nothing's happening K-passo, what happened in other words So we have the phase out I won't go through the entire worksheet here But you can see that there's going to be Basically a phase out worksheet So let's say that we had Actually let's take a look at the worksheet In a little bit more detail So the total qualified student loan interest Paid not more than 2,500 So we can see basically a cap here Enter the amount from form 10,40,10,40 SR line 9 That's the 100,000 Currently our income line We're looking at kind of like a modified Adjusted gross income type of phase out threshold And then enter the total of the amounts From schedule 1, line 11 So these would be the adjustments That are put in place For when we're looking at kind of like A modified AGI kind of phase out calculation Then you subtract those lines Enter 75,155,000 If married filing joint So now we're looking at Where the caps are going to be In terms of income levels Which of course is going to be different From a married couple versus non-married If they're married filing joint that is And is the amount on line 4 more than line 5 If no, skip to line 6 and 7 If yes, subtract And then divide line 6 by 15,000 But not more than one Okay and so on and so forth So let's lower the income threshold Shall we? Let's say that we bring it on down And say the income threshold is like 80,000 So now we're at the 80,000 And we're going to say that boom We got the 1,667 So again they're capping it At the 2005 And then basically phasing It out from that point So then we can say okay My income was down to 60,000 And go okay Boom Now we're getting the full amount of the 2005 Because that's going to be basically The cap, right? So that's going to be the general idea Now let's mirror that in It'll be different from married So we'll do that in a second But let's mirror that over here In our income tax formula So I could say okay If I got this student loan interest And an adjustment to income So I'll just add a line item here And so we'll pull this down And we'll just call it Student loan interest Actually they might not be a student anymore When they're paying the interest So it's like it should be More properly called X student loan interest Because now they have graduated Hopefully And now they're like Fully anyways You know what I'm talking about It's the wrong name But we'll put this Make this blue bordered And then because there could be More than one possibly And I'll say this is going to be The total student loan interest Because you might get one from the spouses So I'll leave a couple spaces And then we might put the max Over here just so we know what it is So I could say max Is at the 2,500 So if they put something like If the thing said 10,000 On the data input Maybe I'll do two columns here Then what would happen Is I'm going to say It's going to be the lesser of It'll be say equals If, well I can't even do that Because it could phase out But I can see those two And say okay it's going to be 2,500 Because that's the max So I'll look at these two And say I'm going to take this one And then we're going to go And so there is that So this is going to be Totalling down to here But then I'm going to say plus And then I'll pick up the total Which I'll put down here So let's sum this up Sum equals the sum Boom There Okay so there's the 2,500 Which pulls into the first page Of the form 10,40 2,500 That gets us to 97,5 That 97,5 should be mirrored Over here Page one of the form 10,40 So we're at 60,000 now Let me change my income Hold on a sec Phase out happened So I'm going to say 60,000 on the income So now we've got 60,000 Minus 25 Gets us to 57,5 57,5 13,850 And that will get me to the Taxable income 43,650 43,650 The tax calculated Page number two 5,021 Alright 5,021 Okay so there's that Now if they were married Then of course those Adjustment The cap would adjust So I can go back on over And say alright Well what if We have a married couple A married couple here And we're going to say Married filing joint So then If I bring the income back To 100,000 That's not where the income is Let's bring the income back To 100,000 And go to my forms And schedule one And page number two So now we still have The 2,500 Even though we had the 100,000 And there Because they're married So now you've got The still qualified student loan At the 2005 100,000 Is not phasing it out From the 2005 As of this But there's a higher cap So if I jump on over Note that now I could have of course Student loan interest For the taxpayer or the spouse So I could put Well what if I had 10,000 In both taxpayer and spouse Because they both had student loans Each of them getting Their separate forms Of the 1099 Or 1098E Sorry if I called it 1099 before But in any case There it is It's still capping At the 2,500 And so there's that But we can also say Well what if wages go up And I could make wages Just to make it For both people Wages This is going to be the spouse So let's say it was 50,000 And 50,000 If I go back on over So we're still at the 2,500 Splitting between the two And then let's say that we had One was making 100,000 So now we're at a total of 150,000 We're still at the 2,500 What if I go to 110,000 And then we're now It's starting to phase out And then it'll totally phase out If I go up to like 150,000 That would be a 200,000 total Then we're phased out here So you can see that Basically phase out in this calculation And if I go back Just to check it back to 110,000 Hold on I thought that was Yeah there it is And then that pulls in to the form 1040 So we can see it now I'm at 160 total on income There's the 2082 Bringing the AGI to 157,918 So that's the general idea Pretty easy for the data input side of things Oftentimes the software can help you out Of course with the phase outs You might get questions about whether it be deductible Or not And clearly this education stuff Leads to political questions and so on About the nature of loans And should they be forgiven What does that do to the price of education And what not And of course you could get questions About people in terms of a tax perspective What are the benefits of education Is it worthwhile Clearly there's subsidization From the government of the education And the form of credits And deductibility of things and what not But the trade off of that is the cost of education Has been skyrocketing And the quality might not have to be Keeping up with the price So the question is So those questions of course Are more planning type questions