Students and their families, higher education professionals, and the very way colleges and universities do business would be impacted by a recently released draft of the “Tax Reform Act of 2014.” Dave Camp, a Republican from Michigan and chair of the House Ways and Means Committee, made his draft document public but has not yet submitted the 974-page document for consideration as formal legislation.
The National Association of College and University Business Officers (NACUBO), while acknowledging that this is simply a proposed draft at this point, believes there is potential for various aspects of the proposal to be adopted in other legislative processes and that the document includes serious implications for individuals in the higher education community. As a result, NACUBO released an update on the discussion detailing some key takeaways from the draft legislation. Below are some of the important points NACUBO highlighted that directly affect students and their families.
The proposed draft of the “Tax Reform Act of 2014” would:
• Modify the American Opportunity Tax Credit (lower income levels for eligibility, increased refundability).
• Require institutions to report amounts paid, rather than amounts billed, on IRS Form 1098-T.
• Repeal the deduction for interest on student loans.
• Repeal the deduction for qualified tuition and expenses.
• Prohibit new contributions to Coverdell education savings accounts.Repeal the Lifetime Learning tax credit.
• Modify the age test for a qualifying child. The present code includes many provisions for taxpayers with children, including personal exemptions. Such provisions require an age test for a qualifying child. In general, under current law, a child must be under age 19 or under age 24 in the case of a full-time student. The Tax Reform Act of 2014 would modify the age test and allow only a child that has not attained age 18 to qualify. It should be noted that the proposal repeals the deduction for personal exemptions, but for other remaining provisions for taxpayers with qualifying children, there would be no accommodation for full-time students.
For more details about the ways in which the proposed tax reforms would affect other higher education constituents (i.e. business officers, employees, donors, etc.), please refer to NACUBO’s update.