March 16, 2001
Senate Panel Approves Education Tax Benefits
The Senate Finance Committee March 13 unanimously approved a measure that would provide over $20 billion in education-related tax benefits over the next 10 years. The proposal includes provisions related to the student loan interest deduction and the tax status of National Health Service Corps scholarships. Additional provisions increase the amount individuals may contribute to education savings accounts, opens those savings accounts to elementary and secondary education expenses, makes permanent a provision allowing individuals to exempt from taxable income the undergraduate education costs paid by their employer, and eliminates taxes on the interest earned from state prepaid tuition and college-savings plans.
Specifically, the chairman's mark includes provisions to eliminate the 60-month limit on how long borrowers may deduct interest paid on education loans from their federal income taxes. The income threshold limits are also raised to $65,000 for single filers and $130,000 for joint filers, up from the $55,000 and $75,000 limits in current law. The proposal does not increase the amount of interest that may be deducted. The AAMC supports broader provisions included in House legislation (H.R. 436) that repeal the limits on the amount of deductible interest and raising the income thresholds to $115,000 for single filers and $165,000 for joint filers, as well as the elimination of the 60-month rule.
The proposal also exempts from taxation awards made for tuition, fees and education-related expenses under the National Health Service Corps Scholarship Program and the F. Edward Hebert Armed Forces Scholarship Program.
Senate Finance Chairman Charles Grassley (R-Iowa) noted that because the Constitution requires that all tax legislation originate in the House of Representatives, this proposal would likely be incorporated into existing tax cut legislation or to a measure reauthorizing the Elementary and Secondary Education Act.
Information: Jonathan Fishburn, AAMC Office of Governmental Relations, 202-828-0525.
