Tax Reform Bill Would Significantly Change Education Benefits

On October 30, Reps. Diane Black (R-TN) and Danny Davis (D-IL) introduced H.R. 3393, the Student and Family Tax Simplification Act. Reps. Black and Davis head a tax reform working group among House Ways and Means Committee members that was tasked with examining the various higher education tax benefits and suggesting possible reform measures.

While the Black-Davis bill would make the American Opportunity Tax Credit (AOTC) permanent (it is currently set to expire at the end of 2017), it would unfortunately eliminate the Hope and Lifetime Learning credits and the tuition deduction without allowing a benefit beyond the first four years of college. Additionally, it would reduce the income limits for being eligible for the benefit by almost 50 percent. Under current law, the full benefit is available to single taxpayers making $80,000 or less and married/joint filers making $160,000 or less. H.R. 3393 would reduce those amounts to single taxpayers making $43,000 or less and married/joint filers making $86,000 or less. This would significantly reduce the number of students and families who would be eligible for the benefit.

While any significant movement on tax reform measures appears unlikely this year, NAICU continues to advocate for modifications to the bill that would prevent any current students or families from losing their tax benefits.

NAICU Submits Recommendations to Simplify and Strengthen the Legislation

Prior to the legislation being introduced, NAICU formally submitted its own recommendations for simplifying and strengthening the higher education credits and the deduction. In the recommendations, and in conversations with members and staff, NAICU stressed the importance of maintaining a three-tiered system of education tax benefits - benefits that help students and families save for college, pay tuition, and repay student loans and help with continuing education.

NAICU supports simplifying the various tuition credits and deduction that have been added to the tax code during the past two decades, additions that cause confusion among taxpayers who end up claiming less generous benefits or no benefits at all. Specifically, making the AOTC permanent, allowing at least a partial benefit beyond the first four years of college, and maintaining the current income eligibility limits would result in one clear and simple tuition tax credit. A permanent, extended AOTC would also negate the need for separate, less generous, Hope and Lifetime Learning credits and the tuition deduction.

Earlier this year, Ways and Means Chairman Dave Camp (R-MI) set up eleven different working groups on tax reform to examine a variety of current benefits. NAICU joined others in the higher education community in meeting with Reps. Black and Davis and their working group staff, to discuss the options for simplifying the higher education benefits.

For more information, please contact:
Karin Johns