Senate Committee Reaches Deal to Extend Tuition Deduction, But Not AOTC
The Senate Finance Committee has reached a tax credit deal that would expand the above-the-line deduction for qualified tuition-related expenses (tuition deduction) to the end of 2013, but would not extend the American Opportunity Tax Credit (AOTC), a partially refundable $2,500 tax credit for higher education costs that expires at the end of this year.
According to a recent GAO study, in 2009 more than 9 million tax filers claimed the AOTC, receiving $16 billion in tax benefits. Almost 65 percent of these benefits went to tax filers with incomes above $40,000.
The Family and Business Tax Cut Certainty Act of 2012 generally provides two-year extensions for other tax credit provisions, most of which expired at the end of 2011. In addition to the tuition deduction, it would extend the IRA Charitable Rollover. The bill does not provide an offset and would increase the deficit by a total of $151.7 billion over 10 years.
The maximum tuition deduction was $4,000 for taxpayers with AGI of $65,000 or less ($130,000 for joint returns) or $2,000 for taxpayers with AGI of $80,000 or less ($160,000 for joint returns).
NASFAA has joined several other higher education groups in expressing support for extending the tuition deduction, as well as the AOTC and other tax provisions not included in the package. These include the Employer-provided Educational Assistance benefits, the expanded Student Loan Interest Deduction (SLID) and the expanded Coverdell Education Savings Accounts (ESAs).
"It is essential that these tax provisions be extended this year to help make higher education accessible for millions of Americans and to ensure that our nation will have the educated citizenry the future requires," the ACE letter states.
While the efficacy of education tax benefits in expanding college access have been called into question in recent years, NASFAA has historically supported the extension of these benefits rather than losing them to deficit reduction.
According to reports, Republicans would not agree to extend the AOTC, while Democrats say they will continue to push for it.