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June 12, 2001 President Bush signed into law (PL 107-16) the Economic Growth and Tax Relief Reconciliation Act of 2001 on June 7, 2001. While the law addresses many aspects of the tax system, there are some specific sections which relate to higher education. Section 412 Eliminates the 60-month rule on student loan interest. The prior limitation of $40,000 gross adjusted income ($60,000 for joint returns) has been increased to $50,000 ($100,000 for joint returns). Section 222 Determines the amount of qualified tuition and related expenses. For 2002 and 2003, the limit is $3,000 for taxpayers whose adjusted gross income does not exceed $65,000 ($130,000 for joint returns). For 2004 and 2005, the limit increases to $4,000 for taxpayers whose adjusted gross income does not exceed $80,000 ($160,000 for joint returns). Section 222 still maintains that only one education incentive can be used. The taxpayer must choose either the credit or the deduction. The full text of the law can be found at the Library of Congress(PL 107-16) Thomas site. There is a good write-up on the new tax ramifications on the Saving For College site, under the heading Tax Incentives for Education After the 2001 Tax Relief Act.
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