 Income tax 2022-2023, student loan interest deduction, tax software example, let's do some wealth preservation with some tax preparation. Support Accounting Instruction by clicking the link below, giving you a free month membership to all of the content on our website, broken out by category, further broken out by course. Each course then organized in a logical, reasonable fashion, making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files, and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it. Here we are in our example, Form 1040 populated with LASERT tax software. You don't need tax software to follow along, but it's a great tool to run scenarios with. You can also get access to the Form 1040 related schedules and forms at the IRS website, irs.gov, irs.gov, starting point as usual. Single Filer, Mr. Anderson, 100,000 on the wages. We've got the 12,950 for the standard deduction, getting us down to the 87,050, mirroring that on our Excel worksheet, 100,000, 12,950, 87,050, page 2, calculating the tax. Then at the 14774, 15,000 withheld, getting us to the 226, mirrored over here on our income tax formula. However, our major focus is on page one, the calculation to get down to taxable income on down below. We're focused on the student loan interest. Now the couple of things just to remember to keep in mind with the student loan interest, you will typically get a form for it. So it's fairly straightforward and easy from that perspective. And remember when you're talking to people, this is going to be the interest on the loan. So when people are taking out the loans, that's not when we're getting the benefit here. It's when they're basically paying back the loans and are being charged interest on it. This is for the interest portion of the loan, not the full loan payment itself. So we've got the 1098E note that that's different than a 1099. Normally when we see the form 1099, we get scared. We say, oh no, this is something we might have to include in income. But with the 1098, that might actually be something good, which we might get like a deduction for as we do here. Oh, and a deductible? So we'll typically have a form for that. There's also going to be an income threshold that we need to be aware of. And there's a cap, I believe, at the 2500 for the maximum amount of the deduct deduction. So if the student loan interest, and this is just the interest portion, is over the 2500, we could be limited there. And we've got the phase outs as well. And the phase out that are at, you're not going to get the deduction if you're over 85,000 or 175,000 married filing joint. So for example, if I went to page one, and we go to number two, this is schedule one, page two, and scroll down to the student loan interest. I'm going to jump to the data input. And so there it is. I imagine it was like 10,000 on the interest. So it's going to be a lot of interest. We would be paying there if it was that much. But just to show where the caps are, but note here, nothing pulls over. Why? Because it got limited. So total qualified student loan interest. There's the cap 2500. But then it was further limited by the fact that we're over the income threshold. So let's close this back out. And I'm going to go, okay, let's change my income threshold and bring it down to, let's say, 50,000, 50,000. Then if I pull back on over, now I've got it capped it at 2500. So, and I put in 10,000, it capped it at the 2500. So that's an item we'd want to keep in mind as well if we're discussing if there's a whole lot of student loan interest, which isn't the payment, but the interest. So there it is. It pulls on to page one. If I mirror that on my little worksheet over here, I'd say we have the itemized deductions. Let's go to those. Those are the, not the itemized deductions. Adjustments to income. Pull it together for crying out loud. Pull it together. This is going to be student. I'll just put one line on it. Student loan interest. You could have multiple student loans because there could be, you know, married couple with multiple loans, but we're just going to combine them together here instead of having a bunch of different lines. I put 2,500. Now you could do a limitation like you could say the cap is 2,500. And let's do like an if 2,500. And then you might, and then you, and then you might do, or you might do something like this. Let's say this is 2,500. And the data input is going to be here. Boom. And then the, and then we put in 10,000. And then you'd say it would be the lesser of equals the men equals the men of those two because there's the cap. So you could try to work in your cap calculation that can get a little bit messy if you had student loan interest in a married situation. But that for general rule, you could do something a little fancy like that to help you to help you see what the cap is, you know, on your worksheet. And then that's going to pull over to page one. So there's the 2,500, the 97,000 there. So there's the, if I go to page one, page number one, I need to bring down the income to 50,000, 50,000. I forgot 50,000 minus 2,500 is 47,5. 47,5. There it is. Minus the 12,950 gets us down to the 30, 34,550. So 34,550. And then I can let the software do the calculation on the second page, but I'm just going to stop it there because that's where our major focus is at. So now if I pulled it up, if I made my income go up to like, let's say like 80,000, and I bring it on back over. Now it's limiting the deduction that I have here. So if I go to my schedule one, you can check out that on the worksheet. So you can see what the phase out starts to be an applied is I won't go through the calculation. Obviously, you don't typically explain all the calculations to a client. The software can help you to understand and make sure that the calculations are properly being calculated. But the general idea is that, yeah, you're going to get the student loan interest if your income is below a certain threshold, but then it starts to phase out as your income gets above a certain threshold and then it caps out at like 85,000 or so where you don't get any benefit at all. And so if I bring it up to 85,000, then it has been eliminated. Okay, so then we can also let's say if we had a married couple. So now Mr. Anderson got married to Jane Anderson now. So 85,000. And now we've got the 2,500 has been applied again because if I go back to the schedule one and page two, we've got the 2,500 because the threshold is up to you don't lose it all completely until you get to like 175,000. So if I brought the income, if I said, for example, wages and added a W2 number two W2 for the spouse. And I said we had another, we had another, let's say 50,000. That's going to let's say 60,000 and I pull that on over. So we're still at the 2,500. So it's still capping it out at the 2,500. Let's say we brought this up to 70,000 for a total of 255. So now it's starting to reduce it now 2,500 is being reduced. And then if I bring it up, you can just see the kind of the curve here as we adjust it. If I bring it up to 80,000 for a 165 total, then we're at the 832. And then if I bring it up to something close to 175,000, which is going to be 80,000, then I think it's going to be eliminated. So there it is. So you get the general sense of it on the married side of things. Obviously the phase out thresholds typically being higher for married versus single.