Intuit Academy Tax Practice Exam

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Ava, a single accountant earning $35,000, can reduce her adjusted gross income through which deduction?

Student Loan Interest Deduction
Health Savings Account Deduction
Traditional IRA Deduction
Charitable Contributions Deduction

The correct answer is: Student Loan Interest Deduction

The Student Loan Interest Deduction is a valuable way for individuals like Ava to reduce their adjusted gross income (AGI). This deduction allows qualifying taxpayers to deduct up to $2,500 of interest paid on student loans, which can directly lower the amount of income subject to taxation. This is particularly relevant for single taxpayers, such as Ava, who may be in the process of repaying student loans while working. Since she is earning $35,000, utilizing this deduction can provide her with tax savings, making it a beneficial option for reducing her overall taxable income. The other choices, such as the Health Savings Account Deduction, the Traditional IRA Deduction, and the Charitable Contributions Deduction, can also serve as methods to deduct amounts from income or adjust AGI, but the Student Loan Interest Deduction specifically permits a deduction based on interest paid on student loans that is generally available even for individuals who do not itemize their deductions, thus making it a widely applicable option for someone in Ava's situation.