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4 October, 14:04

Charlie is a single taxpayer with income of $107,000 which includes $22,500 of interest income. Contributions to Coverdell educational savings accounts are phased out between $95,000 and $110,000. What is the maximum contribution Charlie can make to an educational savings account?

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  1. 4 October, 14:32
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    Modified Adjusted Gross Income = $107,000

    Income Limit for Contributions = $97,000

    Amount that can be contributed = NIL

    Explanation:

    Charlie is a single taxpayer with income of $107,000 which includes $22,500 of interest income.

    Contributions to Coverdell educational savings accounts are phased out between $95,000 and $110,000.

    What is the maximum contribution Charlie can make to an educational savings account?

    Modified Adjusted Gross Income = $107,000

    Income Limit for Contributions = $97,000

    Amount that can be contributed = NIL

    The IRS states that ''Any individual whose modified adjusted gross income is under the limit set for a given tax year can make contributions.'' hence, Charlie cannot make contributions
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