Higher education reporter Anne Ryman of The Arizona Republic gives five tips to find free money for college. Hannah Gaber/azcentral.com
Tax bills passed by the House and Senate in Congress would have major implications for universities and students if signed into law, college officials say, including reducing or eliminating some popular tax deductions and taxing tuition waivers for graduate assistants.
Other provisions would reduce incentives for charitable giving, which could make people less likely to donate to non-profit university foundations.
Both bills have passed their respective houses of Congress and must be negotiated before a final bill is sent to President Donald Trump.
These are the key provisions that affect universities and their students and families:
Tuition waivers for graduate students taxed
The House proposal, derisively dubbed the “grad school tax” by students, would remove the tax exemption on tuition waivers for graduate teaching and research assistants. The Senate bill preserves this tax exemption. If included in the final bill, this means graduate students would have to count the waivers as income, even though they don’t receive the money directly.
Education tax credit gone for some, expanded for others
American Opportunity Tax Credit is a $2,500 annual tax credit per college student that can be claimed. Under the House GOP version, part-time-students and graduate students no longer would qualify for this deduction.
The credit can be used by students as long as they aren’t claimed as dependents on their parents’ taxes. If they are claimed on their parents’ taxes, the parents get the tax credit.
On the plus side, for undergraduate students, the bill extends the tax credit for another year, enabling a student or parent to use it for up to five years. The benefit would reduce by half in the fifth year, making it a $1,250 deduction.
Student-loan interest deduction eliminated
The House bill would repeal the deduction for interest on student loans. This deduction allows single borrowers who make up to $65,000 and married couples who make up to $130,000 to lower their taxable income by $2,500, according to the American Council on Education. Those with loan debt save up to $625 a year, according to one estimate.
More than 12 million borrowers deducted the interest on their student loans in 2014, according to the council.
Employer tuition reimbursement eliminated
The House bill would do away with an incentive for employers to provide tuition reimbursement to employees of up to $5,250 a year.
Charitable giving may drop
Both bills would double the standard deduction for individuals and couples, thus reducing the number of taxpayers who itemize on their taxes. The American Council on Education predicts this would reduce the value of charitable deductions and lead to a drop in donations to all non-profits, including non-profit college foundations.
Endowments for some institutions taxed
Both the House and Senate bill contain tax provisions on investment income for some private institutions, which would affect non-profit foundations affiliated with universities.
Neither bill, though, would apply to the foundations affiliated with Arizona’s three state universities because they are state schools.
Proponents see multiple tax benefits
Supporters of the bills say that while some deductions and credits will go away, families will benefit from other tax cuts. For example, the Senate bill doubles the standard deduction, which means more people could end up with no federal tax bill and others could get larger refunds.
Another example: Families who are eligible for a child tax credit would get $2,000 per child under the Senate bill and $1,600 via the House bill, compared to the current $1,000.
Higher education associations oppose bills
Several higher-education groups are opposed to changes.
The American Association of State Colleges and Universities has opposed both bills, saying the provisions undermine public colleges and universities.
The American Council on Education calls the Senate version passed on Dec. 1 “a significant improvement over the measure passed in the House” but still problematic for higher education.
Locally, Arizona State University’s Graduate & Professional Student Association has produced a fact sheet for students, detailing how the group says the House bill will adversely impact grad students.
The group is encouraging students to call and tweet their representatives in Congress, voicing opposition with the hashtag #ReworkTheReform.
The ASU group also wrote a letter to ASU President Michael Crow, saying students oppose certain provisions of the House’s tax bill and asking Crow to support students and “do everything in your power to prevent the devastating impacts these cuts would have on higher education.”
Crow tweeted on Nov. 21 that “we have visited with every member of the AZ delegation on the #GradStudentTax and will continue to communicate with them and others about protecting grad students from any unfair tax impact.”
The Arizona Board of Regents, which oversees the state university system, has not taken a position on the bills.
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