The Republican Tax Plan Puts These Education Tax Breaks at Risk
Congressional Republicans have released their proposal for tax reform, and it includes a number of key provisions that will affect every taxpayer. Yet amid corporate tax reductions, the eventual elimination of the estate and alternative minimum taxes, and a simplified structure of tax brackets, some more specialized provisions of the tax bill haven't gotten the attention they deserve. In particular, the Republican tax plan would make substantial changes to the tax breaks that people get for costs related to education, taking away some valuable provisions and making significant changes to others. Those who face educational expenses in the near future or who are still paying down student debt need to understand the implications of the tax plan on their finances.
The Republican tax plan would eliminate the current provisions allowing many taxpayers to deduct the interest they pay on student loans as well as a certain amount of the tuition and required fees that they pay. Under current law, single filers making $65,000 or less or joint filers making $130,000 or less can deduct up to $2,500 of their student loan interest payments. Partial deductions are available for incomes up to $80,000 for singles and $160,000 for joint filers. The same income limits also apply to the tuition and fees deduction, which allows deductions of up to $4,000 for money spent toward these educational costs.
One of the biggest benefits of both of these deductions is that taxpayers can claim them even if they don't itemize. Eligible taxpayers have been able to adjust their gross income downward to reflect these above-the-line deductions. With 13.4 million taxpayers claiming student loan interest deductions and another 3.9 million claiming the tuition and fees deduction according to the most recently available IRS data, the elimination of these two provisions will have a substantial impact on taxes for a substantial fraction of the American public.
Source: Fool.com
