Increases the personal income tax credit for college tuition from the first $10,000 to the first $20,000 of college tuition expenses.
TITLE OF BILL: An act to amend the tax law, in relation to increasing the college tuition personal income tax credit and contributions to family tuition accounts
PURPOSE: To increase the amount of tuition expenses that can be claimed for the tuition tax credit and to increase the amount that a family can deduct from their income taxes for contributions to the college choice tuition savings accounts.
SUMMARY OF PROVISIONS:
Section 1 amends subparagraph (A) of paragraph 2 of subsection (t) of section 606 of the tax law to double the amount that can be claimed as an allowable college tuition expense from ten thousand to twenty thousand.
Section 2 amends paragraph 32 of subsection (c) of section 612 of the tax law to double the exclusion a single payer can claim for contributions to a family tuition account from five to ten thousand for a single filer and from ten to twenty thousand for married filers filing jointly.
Section 3 sets an immediate effective date.
JUSTIFICATION: New York State currently helps lessen the burden on families coping with paying for college by offering the option of a credit or deduction for college tuition expenses they incur during a tax year. A participating New York taxpayer can claim this credit or deduction on tuition expenses they paid for themselves, a spouse or a dependent. The credit or deduction can be claimed on expenses paid to any accredited college or university, whether it be in New York or outside of New York, and regardless of whether it is public or private. Families in New York get a choice of applying for a credit, which is money they get back after their tax liability is calculated, or claiming a deduction, which lowers their taxable income, depending on which solution they find most helpful.
The amount of tuition expenses that can be claimed for this credit has not been changed since 2001, when this credit was created. According to a report by the College Board, the average cost of tuition at a private nonprofit four-year institution was $29,056 for the 2012-13 academic year, a 26% increase from the 2002-03 academic year. In the same time the average tuition for public four-year institutions has climbed by 40% according to this same study. The current credit amount needs to increase to keep up with this massive inflation in college costs.
In the late 90's New York created the New York State College Choice Tuition Savings Program, also known as the 529 College Savings Program. Families can set up 529 accounts for their children and contributions into these accounts can be later used to pay for any qualifying educational expenses, be it tuition, fees, textbooks, and certain room and board costs. New York's 529 College Savings Program has proven quite popular. According to market reports New York's College Savings Program is the second largest in the country, with
over 764,000 account open totaling over $14.23 billion in funds invested in the program. As with the tuition tax credit, the amounts that individuals can deduct from their taxes for contributions to these accounts has not changed since the early 2000's. As the College Board report shows, the increase in the costs of tuition plus additional expenses has been significant. The average total costs at four-year private nonprofit institutions have increased by 25% from the 2002-03 academic year to the 2012-13 academic year and at public four-year institutions the increase has been an incredible 45% in the same time. The amount individuals can contribute to these accounts tax free needs to keep up with the massive inflation in college costs that we have seen in the last decade.
LEGISLATIVE HISTORY: This is a new bill
FISCAL IMPLICATIONS: This legislation would double the amount individuals can claim as eligible tuition expenses for the tuition tax credit and the amount that filers can deduct from their income taxes for contributions to family tuition accounts. Currently these two tax expenditures are estimated to cost the State $305 million, with $250 million for the tuition tax credit and $55 million for deductions for contributions to family tuition accounts. The most conservative estimate is that this legislation would double those costs, and thus would cost the state an additional $305 million in lost tax revenue annually.
EFFECTIVE DATE: This act shall take effect immediately and apply for the tax year beginning on January 1, 2014.
STATE OF NEW YORK ________________________________________________________________________ 6697 IN SENATE February 28, 2014 ___________Introduced by Sens. CARLUCCI, KLEIN, SAVINO, VALESKY -- read twice and ordered printed, and when printed to be committed to the Committee on Investigations and Government Operations AN ACT to amend the tax law, in relation to increasing the college tuition personal income tax credit and contributions to family tuition accounts THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Subparagraph (A) of paragraph 2 of subsection (t) of section 606 of the tax law, as amended by section 1 of part N of chapter 85 of the laws of 2002, is amended to read as follows: (A) The term "allowable college tuition expenses" shall mean the amount of qualified college tuition expenses of eligible students paid by the taxpayer during the taxable year, limited to
[ten]TWENTY thou- sand dollars for each such student; S 2. Paragraph 32 of subsection (c) of section 612 of the tax law, as amended by chapter 81 of the laws of 2008, is amended to read as follows: (32) Contributions made during the taxable year by an account owner to one or more family tuition accounts established under the New York state college choice tuition savings program provided for under article four- teen-A of the education law, to the extent not deductible or eligible for credit for federal income tax purposes, provided, however, the exclusion provided for in this paragraph shall not exceed [five]TEN thousand dollars for an individual or head of household, and for married couples who file joint tax returns, shall not exceed [ten]TWENTY thou- sand dollars; provided, further, that such exclusion shall be available only to the account owner and not to any other person. S 3. This act shall take effect immediately, and shall apply to the taxable year in which it takes effect and taxable years commencing on or after such date.EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD13188-02-4