As Iowans open up their mail boxes in the coming weeks to collect their tax rebate checks from Uncle Sam, the good tidings will continue with more tax relief in the years to come. In addition to the across-the-board rate cuts that started in July, the new tax laws signed by President Bush on June 7 include substantial pro-family items that will help parents save money for their children’s education, encourage workers to sock away more money for retirement and provide financial incentives for those who open up their hearts and homes to adoptive children, including those with special-needs.
As the dog days of summer begin to shorten, college-age students and their parents are getting ready to foot tuition bills for the approaching fall semester. As a father of five with nine grandchildren, I can appreciate the financial concerns shared by parents across Iowa. Saving for your children’s higher education and paying for seemingly endless school-related expenses from kindergarten through high school may seem like an impossible proposition, especially with the amount of money it takes to run a household, pay for rising energy costs, buy health insurance, put money away for retirement and fulfill local, state and federal tax obligations.
During negotiations on the largest federal tax cuts in 20 years, I worked as chairman of the tax-writing Senate Finance Committee to make sure that ordinary working families would feel relief. The Economic Growth and Tax Relief Act of 2001 includes a number of changes to the tax code that empowers parents to meet the rising costs of raising a family, save money for school expenses and afford college education for their kids.
First, starting this year the per-child tax credit will rise from $500 to $600 and increase each year by $100 to $1,000 per-child in 2010. This federal tax credit also will help lower-income families. For the first time, this tax benefit will be partially refundable for those who don’t earn enough to pay income taxes but whose paychecks are squeezed nonetheless by payroll taxes.
The education tax incentives include an increase in the annual limit on contributions to tax-free education savings accounts from $500 to $2,000 beginning next year. For the first time, qualified expenses also may be made tax-free for elementary and secondary school costs. Under my leadership during negotiations on the tax relief bill, a historical first-time-ever deduction was created to help parents afford higher education for their children. Starting next year, taxpayers with adjusted gross incomes up to $65,000 ($130,000 for married filers) may deduct college tuition fees up to $3,000 and the amount increases to $4,000 in 2004. The new tax laws also: expand prepaid tuition programs to include qualified private institutions of higher learning; make permanent tax-favored treatment for employer-sponsored educational assistance for undergraduate and graduate courses; and increase the income ceiling for eligibility of the student loan interest deduction to $65,000 for single taxpayers and $130,000 for married couples filing jointly. As the chief architect of the student loan deductibility provisions, I also won efforts to extend deductibility for the life of the loan and make it a permanent fixture in the tax code.
Now made even more apparent as great-grandparents, my wife Barbara and I understand the joys, hard work and sacrifice that parenthood requires. As young parents starting out, carving out money for your child’s education may seem inconceivable when you’re still paying off your own school loans. The education tax tools listed above should help give parents a head start on their children’s educational expenses.
Keeping my nose to the grindstone in Iowa helps me bring common sense to the policy tables in Washington. Holding meetings in each of Iowa’s 99 counties at least once every year keeps me in touch with the life circumstances of my constituents and how matters of public policy will affect their families. With this pro-family tax relief bill enacted into law, working families in Iowa will get to keep more of what they work so hard to earn. When recent studies estimate it will take $160,000 to raise a child to age 17, parents need all the tax relief they can get.