The TRA '97 offers a multitude of education incentives.
The Tax Adviser › Vol. 29 Nbr. 4, April 1998
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Summary
Taxpayer Relief Act of 1997
The Taxpayer Relief Act of 1997 includes several important provisions intended to stimulate higher education which will cost the government approximately $99 billion over a 10 year period. The Lifetime Learning and the Hope Scholarship Credits account for approximately $76 billion of that figure. Other provisions include the education IRA, student loan interest deduction, and broadening of some existing incentives. Planning for choice and timing is necessary for full benefit realization.See the full content of this document
Extract
The TRA '97 offers a multitude of education incentives.
In an effort to encourage taxpayers to pursue higher education, Congress enacted a host of incentives in the Taxpayer Relief Act of 1997. Available for the first time are Hope Scholarship and Lifetime Learning Credits, education individual retirement accounts and an above-the-line deduction for student loan interest; extended/expanded provisions include qualified state tuition programs and employer-provided education assistance.
The Taxpayer Relief Act of 1997 (TRA '97) significantly expanded the tax benefits associated with higher education expenses. The law now includes a plethora of provisions granting a variety of benefits to taxpayers, including tax credits, deductions, exclusions, and tax-favored methods of financing and saving for higher education costs. Not only did the TRA '97 expand the types of education-related tax benefits afforded to taxpayers, it also provided tax benefits to groups of taxpayers largely ignored under prior law, including both the traditional student and certain nontraditional students whose higher education expenses are not deductible under Sec. 162. The education tax incentives are summarized in Table 1 on page 246. [TABULAR DATA 1 NOT REPRODUCIBLE IN ASCII] The 10-year revenue cost for the TRA '97 education benefits is estimated at almost $99 billion, $76 billion of which is attributable to two tax credits available in 1998 and beyond, the Hope Scholarship Credit (Hope Credit) and the Lifetime Learning Credit (Learning Credit).(1) The Education individual retirement account (IRA), a new savings-oriented provision, can be established in 1998, but the actual tax benefits may take some time to realize. Changes to the tax treatment of qualified state tuition programs (QSTPs), including a provision to include room and board expenses as qualified higher education expenses (QHEEs), are also effective in 1998. Interest expense on qualifying student loans is deductible beginning in 1998. Finally, the employer-provided education assistance exclusion under S...See the full content of this document
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