Tax Legislation:

Economic Growth and Tax Relief Reconciliation Act of 2001: Part III (May 17th, 2001)


- Increases, from $500 to $2,000, the annual limit on contributions to education IRAs. Most Americans should be able to save more to pay not only for higher education of their children, but also elementary and secondary schools.

- Increases, on a joint return, the phase out so that it is twice that of a taxpayer filing a single return.

- Includes expenditures for qualified elementary and secondary education as qualified education expenses.

- Waives age limitations for special needs children.

- Permits corporations to contribute to education IRAs.

- Permits annual contributions to be made until the filing date (not including extensions) for a tax year.

- Extends the time for return of excess contributions.

- Provides for coordination of the Hope credit, Lifetime Learning credit, and qualified tuition program provisions.

- Permits an eligible educational institution (currently, limited to a State or agency or instrumentality thereof) to maintain a qualified tuition program, provided such program has received a ruling that such program meets the applicable requirements for a qualified tuition program. Private schools are no longer excluded.

- Excludes from gross income education distributions from qualified tuition programs.

- Permits the transfer of credits from one qualified tuition program to another qualified program for the benefit of the same beneficiary without the transfer being considered a distribution. Simplifies switching from one school to another.

- Permits expenses for the special needs services of a special needs beneficiary.

- Permanently extends the exclusion from gross income of employer provided educational assistance.

- Eliminates the 60-month limit on the student loan interest deduction. Increases the income limitation on the student loan interest deduction. Single taxpayers with modified adjusted gross income (MAGI) of less than $50,000 (use to be $40,000) and married filing jointly with MAGI of less than $100,000 (use to be $60,000) can claim full deduction. The deduction is phased out at $65,000 and $130,000 for single filer and married filing jointly respectively.

- Excludes from gross income certain amounts received under the National Public Health Service Corps Scholarship Program and the F. Edward Hebert Armed Forces Health Professions Scholarship and Financial Assistance Program.

- Increases the amount by which certain governmental bonds used to finance public school capital expenditures may be exempted from specified arbitrage bond provisions.

- Provides for the treatment of qualified public educational facility bonds as exempt facility bonds.

- Allows, until December 31, 2005, a limited tax deduction (up to $3,000 for 2002 and 2003, and $4,000 for 2004 and 2005) for qualified higher education tuition and related expenses for taxpayers with adjusted gross income not exceeding specified levels ($130,000 for the married category and $65,000 for others).