NAICU - Outlook Brightens for Expiring Higher Education Tax Provisions

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Outlook Brightens for Expiring Higher Education Tax Provisions

NAICU Washington Update

December 18, 2009

The House has approved the Tax Extenders Act of 2009, extending for one year 49 expiring tax provisions at a cost of $31 billion. The bill passed on December 9 includes one-year extensions of the IRA charitable rollover and the above-the-line tuition deduction, currently set to expire on December 31.

The Senate hasn't scheduled consideration of an extenders package yet, but Senate Finance Chairman Max Baucus (D-Mont.) has indicated his intent to move similar legislation soon, after the Senate completes action on health care overhaul reform.

On December 8, Sen. Charles Grassley (R-Iowa), ranking member of the Senate Finance Committee, introduced legislation that would improve and permanently extend all of the higher education tax provisions set to expire at the end of next year. Items include; the new $2,500 American Opportunity Tax Credit; Section 127 employer-provided education assistance; Student Loan Interest Deduction improvements; and the annual contribution limit increase to Coverdell Education Savings Accounts.

This Grassley bill will likely be a starting point when the Senate takes up a host of tax provisions enacted in 2001 and expiring next year. No immediate consideration is scheduled, and no companion bill has been introduced in the House.

If the House and Senate do extend the 2009 expiring provisions for one year, the IRA charitable rollover and the tuition deduction will be added to the list of all the other provisions expiring on December 31, 2010. This would mean that almost every higher education tax benefit in existence will be set to expire at the end of next year.

There will be tremendous pressure on Congress and the president to extend - and pay for - the myriad of 2001 tax breaks set to expire. This includes not only the higher education provisions, but hundreds of small-business, corporate, estate, family, health, and other provisions enacted as part of the 2001 estate tax relief bill signed into law by President Bush.