Tax-Cut Bill May Make College More Affordable
College may become more affordable, at least for middle-income families, under the massive tax-cut bill President Bush has signed into law.
Under the plan, families could receive a tuition tax deduction, even if they earn too much to qualify for a federal HOPE Scholarship. The new deduction would be $3,000 in 2002, increasing to $4,000 in 2004 and 2005. However, there is no guarantee the tax break would continue into future years. Congress and the White House would have to agree later to extend it past 2005.
Analysts say the deduction would help families earning up to $65,000 and couples earning up to $130,000. Current income limits are $55,000 and $75,000, respectively. Some of these families do not qualify for the HOPE Scholarship, which offers $1,500 for each of the first two years of college.
Another provision of the tax bill would increase from $500 to $2,000 the maximum annual contribution to education savings accounts, which parents can create to save money for college. The bill also eliminates the five-year time limit to deduct interest on student loans, effectively allowing deductions indefinitely. Higher-income borrowers also would qualify for the deduction under the law.
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