WASHINGTON – Senator Chuck Grassley of Iowa is seeking to improve the education tax incentives in the economic stimulus bill under debate in the Senate.
“In a slow economy, people cut whatever they have to, including education,” Grassley said. “They might hold off on training for a new career that would help them weather the economic storm. That starts a vicious cycle because education opens up job opportunities. The stimulus bill should build on existing tax incentives to make education more affordable. That’s a no-brainer.”
Grassley filed an amendment to improve the American Opportunity Tax Credit. As is, the proposal would for 2009 and 2010 create a $2,500 higher education tax credit that is available for the first four years of college. The credit phases out for individual taxpayers with adjusted gross income of $80,000 ($160,000 married filing jointly). Thirty percent of the available credit is refundable, meaning qualifying taxpayers below a certain income level would receive 30 percent of the benefit, even if they have little to no tax liability.
Grassley’s amendment would maintain most of the major features of the American Opportunity Tax Credit as proposed in the stimulus package. Grassley, however, would increase the maximum tax credit of $2,500 to $3,000 for 2009 and 2010. Grassley also would spread out the way the credit is calculated. Grassley said these temporary adjustments would (1) make the tax credit more robust and uniform regardless of income and (2) enhance the effectiveness of the tax credit for middle-income Americans. The amendment would preserve the maximum refundable portion of the tax credit to help low-income individuals with college expenses.
Grassley has long been an advocate of helping Americans better afford college through the tax code. As chairman of the Finance Committee, he successfully included a number of education tax measures in the landmark tax relief law of 2001, the Economic Growth and Tax Relief Reconciliation Act. These measures were enacted into law as part of a bipartisan agreement. Now, Americans can take an above-the-line deduction for the cost of higher education expenses. In addition, people with student loans have greater flexibility when deducting student loan interest. The 2001 law established the tax policy that made Section 529 savings vehicles a highly attractive opportunity for parents, grandparents and other family members to save for kids’ college educations. Grassley subsequently worked to make 529 plans a permanent part of the federal tax code. He is working to make permanent the other education tax provisions included in the 2001 bipartisan tax law.
The Iowa senator also has conducted broad-based oversight of the tax laws governing nonprofits, including college endowments. He has urged colleges and universities to maximize the use of endowment dollars to make higher education more affordable for students.