A pair of lawmakers have introduced legislation to simplify the Tax Code to enable families to more easily afford the cost of higher education.
Reps. Diane Black, R-Tenn., and Danny K. Davis, D-Ill., introduced the Student and Family Tax Simplification Act on Wednesday. The legislation is designed to make it easier and simpler for families to afford the costs of higher education by consolidating four separate tax provisions into a single education tax benefit.
The proposed legislation would consolidate the Hope Credit, the American Opportunity Tax Credit, the Lifetime Learning Credit, and the tuition deduction into a single, but more robust American Opportunity Tax Credit. The new AOTC would be permanent and partially refundable and would provide a 100-percent tax credit for the first $2,000 of eligible higher education expenses and a 25-percent tax credit for the next $2,000 of such expenses, for a maximum credit of $2,500.
In addition, the first $1,500 of the credit would be refundable, meaning that families could receive the benefit regardless of whether or not they have federal income tax liability. The credit could be used to offset expenses for tuition, fees and course materials. It would be available for up to four years of post-secondary education at qualifying four-year universities, community colleges, and trade and vocational schools. The proposed AOTC would begin to phase out for families with incomes between $86,000 and $126,000 (half those amounts for single individuals), ensuring that the credit provides the greatest benefit and value to low- and middle-income families.
“Streamlining the number of education provisions and retooling those that are most effective allows us to simplify the code and reduce some of the confusion that exists in the tax code today,” Black said in a statement. “As a result, students can spend less time figuring out how to finance the cost of a higher education and more time developing the skills they need to succeed in a knowledge-based economy. Our bipartisan bill makes commonsense reforms to make the tax code simpler and fairer when it comes to helping Americans afford the cost of a college education.”
Black and Davis began working on the issue of simplifying tax incentives for higher education earlier this year. The two served as the chair and co-chair of the Tax Reform Working Group on Education, one of 11 separate working groups established by House Ways and Means Committee Chairman Dave Camp, R-Mich., and ranking member Sandy Levin, D-Mich., with the task of reviewing the current tax laws in various areas and then identifying, researching and compiling feedback on them
“Education is key to the economic well-being of our citizens and our democracy,” said Davis. “This bipartisan bill simplifies our Tax Code and strengthens our investment in students and their families, expanding aid for the lowest-income students. The improvements within the bill will help increase college affordability, access, and completion.”
After reporting back to the committee, Black and Davis continued working together, resulting in Wednesday’s introduction of the bill.
Camp praised the bipartisan proposal. “A good education is critical, and it is important that we help students and families struggling with the cost of college,” he said in a statement. “During the working groups, Diane Black and Danny Davis made it clear that the complexity of the tax code was actually making it harder for families to afford the cost of higher education. They addressed that challenge head on and developed a solution to make the tax code simpler and fairer for families, making it easier for families to send their kids to college.”