House File 2117 - Introduced HOUSE FILE 2117 BY R. TAYLOR A BILL FOR An Act providing a deduction from the individual income tax for 1 the amount of interest paid on a qualified education loan 2 and including retroactive applicability provisions. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 5656YH (2) 86 mm/sc
H.F. 2117 Section 1. Section 422.7, Code 2016, is amended by adding 1 the following new subsection: 2 NEW SUBSECTION . 18. Subtract, to the extent not already 3 excluded, the amount of interest paid by the taxpayer during 4 the tax year on a qualified education loan, as defined in 5 section 221 of the Internal Revenue Code. 6 Sec. 2. RETROACTIVE APPLICABILITY. This Act applies 7 retroactively to January 1, 2016, for tax years beginning on 8 or after that date. 9 EXPLANATION 10 The inclusion of this explanation does not constitute agreement with 11 the explanation’s substance by the members of the general assembly. 12 This bill relates to the deduction of student loan interest 13 for purposes of the individual income tax. 14 Under current law for federal income tax purposes and Iowa 15 income tax purposes, an individual is allowed to deduct up 16 to $2,500 of interest paid on a qualified education loan. 17 However, this deduction is gradually phased out for individuals 18 with income in excess of $65,000 ($130,000 for a married 19 couple filing a joint return), and is completely phased out 20 for individuals with income of $80,000 or more ($160,000 for a 21 married couple filing a joint return). These income phase-out 22 levels are adjusted for inflation each year according to 23 federal law. 24 The bill allows an individual to deduct, for Iowa income tax 25 purposes, the total amount of interest paid during the tax year 26 on a qualified education loan. 27 The bill applies retroactively to tax years beginning on or 28 after January 1, 2016. 29 -1- LSB 5656YH (2) 86 mm/sc 1/ 1