HF 2117 (LSB 5656YH (2) 86)

HOUSE FILE 2117

BY  R. TAYLOR

A BILL FOR

An Act providing a deduction from the individual income tax for the amount of interest paid on a qualified education loan and including retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 422.7, Code 2016, is amended by adding the following new subsection:
   NEW SUBSECTION.  18.  Subtract, to the extent not already excluded, the amount of interest paid by the taxpayer during the tax year on a qualified education loan, as defined in section 221 of the Internal Revenue Code.
    Sec. 2.  RETROACTIVE APPLICABILITY.  This Act applies retroactively to January 1, 2016, for tax years beginning on or after that date.
EXPLANATION
The inclusion of this explanation does not constitute agreement with

the explanation’s substance by the members of the general assembly.
   This bill relates to the deduction of student loan interest for purposes of the individual income tax.
   Under current law for federal income tax purposes and Iowa income tax purposes, an individual is allowed to deduct up to $2,500 of interest paid on a qualified education loan. However, this deduction is gradually phased out for individuals with income in excess of $65,000 ($130,000 for a married couple filing a joint return), and is completely phased out for individuals with income of $80,000 or more ($160,000 for a married couple filing a joint return). These income phase-out levels are adjusted for inflation each year according to federal law.
   The bill allows an individual to deduct, for Iowa income tax purposes, the total amount of interest paid during the tax year on a qualified education loan.
   The bill applies retroactively to tax years beginning on or after January 1, 2016.