the distinct purpose of various tax benefits
NAICU strongly supports the current three-tiered structure of higher education tax benefits, including benefits that help families save for college, pay tuition, and repay student loans.
A frequent criticism is that there are too many confusing and duplicative tuition tax benefits. This was first addressed when omnibus tax and spending legislation was signed into law in December 2015. That law made the American Opportunity Tax Credit (AOTC) permanent, and attempted to phase out the tuition deduction. The permanent AOTC also replaces the Hope Tax Credit, and is more generous. Since the AOTC is only available for the first four years of higher education, the Lifetime Learning Credit (LLC) remains in place to help graduate students and lifetime learners. Further simplification occurred when the LLC was expanded in pandemic stimulus legislation signed into law in 2020, and the tuition deduction was eliminated.
The incorrect perception that there are dozens of overlapping and confusing education tax benefits led to an attempt by the House to eliminate almost all of those benefits during consideration of the Tax Cuts and Jobs Act in 2017. Fortunately, the advocacy of colleges and universities and their students resulted in the preservation of all of the current benefits in the final bill.