History of Education Tax Benefits

Year Event
2013 American Taxpayer Relief Act of 2012 (P.L. 112-240) permanently restores graduate student eligibility for employer-provided educational assistance, permanently eliminates the 60-month limitation on the student loan interest deduction. Also, permanently increases the contribution limit on Coverdell Education Savings Accounts to $2,000, permanently allows the use of Coverdell Education Savings Accounts for K-12 and makes other 2001 changes permanent.
2009 American Recovery and Reinvestment Act of 2009 (P.L. 111-5) modifies the Hope Scholarship tax credit into the American Opportunity Tax Credit. Temporarily adds computer technology as an eligible expense to 529 college savings plans for 2009 and 2010.
2007 U.S. Troop Readiness, Veterans’ Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007 (P.L. 110-28) increases Kiddie Tax age threshold from 18 to 19 years of age (24 for full-time students).
2005 Tax Increase Prevention and Reconciliation Act of 2005 (P.L. 109-222) increases Kiddie Tax age threshold from 14 to 18.
2001 P.L. 107-22 renames Education IRAs as Coverdell Education Savings Accounts.
2001 Economic Growth and Tax Relief Reconciliation Act of 2001 (P.L. 107-16) creates the Tuition & Fees Deduction, temporarily restores graduate student eligibility for employer-provided educational assistance, temporarily eliminates the 60-month limit on the student loan interest deduction (effective with the 2002 tax year). Adds option for colleges to create their own prepaid tuition plans. Adds "special needs services" to the list of eligible expenses for 529 college savings plans. Increases annual contribution limit for Education IRAs from $500 to $2,000, adds K-12 expenses to the list of eligible expenses and adds special needs exception to the age limits, effective with the 2002 tax year.
1998 Internal Revenue Service Restructuring and Reform Act of 1998 (P.L. 105-206) adds age 30 age limit to Education IRA distributions.
1997 Taxpayer Relief Act of 1997 (P.L. 105-34) creates the Student Loan Interest Deduction, Hope Scholarship tax credit and Lifetime Learning tax credit. Adds room and board to eligible expenses for 529 plans, adds five-year gift-tax averaging, and adds rollover of education savings bonds into 529 college savings plans and prepaid tuition plans. Creates Education Individual Retirement Accounts (Education IRAs) effective with the 1998 tax year. Adds penalty-free distributions from IRAs for higher education expenses.
1996 Small Business Job Protection Act of 1996 (P.L. 104-188) adds tax-free status for 529 college savings plans and prepaid tuition plans, effective with the 1996 tax year. Also, reinstates limitation of employer-provided tuition assistance to undergraduate students.
1990 Omnibus Budget Reconciliation Act of 1990 (P.L. 101-508) restores graduate student eligibility for employer-provided educational assistance, effective with the 1991 tax year.
1988 Technical and Miscellaneous Revenue Act of 1988 (P.L. 100-647) limits employer-provided educational assistance to undergraduate students. Adds exclusion from income for tuition reductions for graduate student teaching and research assistantships and interest on education savings bonds (effective with the 1990 tax year).
1986 Tax Reform Act of 1986 (P.L. 99-514) increases limit on employer-provided educational assistance to $5,250. Also, restricts tax-free treatment of scholarships and fellowships to exclude fee for services (even if required of all degree candidates), exclude amounts for living expenses and travel/research, and to exclude students who are not degree candidates. Adds Kiddie Tax effective with the 1987 tax year.
1986 Creation of the first prepaid tuition plan, the Michigan Education Trust.
1984 P.L. 98-611 limits employer-provided exclusion from income to $5,000.
1984 Deficit Reduction Act of 1984 (P.L. 98-369) adds exclusion from income for working condition fringe benefits, such as the business deduction for work-related education, effective with the 1985 tax year. Also, adds an exclusion from income for some student loan forgiveness programs.
1982 Tax Equity and Fiscal Responsibility Act of 1982 (P.L. 97-248) adds option for loans from qualified retirement plans.
1981 Economic Recovery Tax Act of 1981 (P.L. 97-34) adds an unlimited gift tax exclusion for direct tuition payments to educational institutions, effective with the 1982 tax year.
1980 Tax Treatment Extension Act of 1980 (P.L. 96-541) requires that tax-free scholarships and fellowships must not be fee for services unless the services are required of all degree candidates, effective with the 1981 tax year.
1978 Revenue Act of 1978 (P.L. 95-600) adds an exclusion from income for employer-provided educational assistance, provisions for hardship distributions for higher education from 401(k) plans.
1954 Internal Revenue Code of 1954 provides unlimited exclusion from income for scholarships and fellowships received by degree candidates.
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