You may have heard quite a bit of talk about the fiscal cliff coming January 1, 2013, when several tax relief provisions expire. What you may not be aware of, is that many of these provision will effect education. We need to strengthen our education system and provide educators and students the framework within which to function successfully. With public school systems all over the country making cuts and post-secondary students suffering financially with large amounts of student loan debt, it is critical to extend these tax relief efforts.
Tax relief expired as of 12/31/11:
- Business Deductions for Education: Enhanced charitable deduction for contributions of book inventories to public schools and enhanced charitable deduction for corporate contributions of computer equipment for educational purposes.
- Individual Tax Deduction for Teachers: deduct for above-the-line expenses of up to $250 for elementary and secondary school teachers.
Tax relief set to expire 12/31/12:
- Employer-provided educational assistance: expand to graduate education and make the exclusion permanent.
- Tax-exempt bonds for educational facilities: increase in amount of bonds qualifying for small-issuer arbitrage rebate exception from $10 million to $15 million and expand tax-exempt bond treatment to public school facilities.
- Student loan interest deduction: eliminate the 60-month rule and the disallowance for voluntary payments; increase phase-out ranges to $50,000-$65,000 for single filers, $100,000-$130,000 for joint filers, indexed for inflation.
- Education Individual Retirement Accounts (Coverdell education savings accounts – “ESAs”): increase of maximum annual contribution from $500 to $2,000, allow ESA contributions for special needs beneficiaries above the age of 18; allow corporations and other entities to contribute to ESAs; allow contributions until April 15 of the following year; allow a taxpayer to exclude ESA distributions from gross income and claim the HOPE or Lifetime Learning credits as long as they are not used for the same expenses; repeal excise tax on contributions made to ESA when contribution made by anyone on behalf of same beneficiary; modify phase-out range for married taxpayers; allow tax-free expenditures for elementary and secondary school expenses; expand the definition of “qualified expenses” to include computers and related items.