The University of Tennessee is working with allies on and off Capitol Hill to ensure any final tax reform effort contains important provisions for students, their families, and our public education institutions. This is fast moving legislation, with Republican leaders aiming to send a version melding the House and Senate packages to President Trump’s desk in December. Reconciling the differences between the two bills is likely to prove challenging, and the time is now to speak out about maintaining provisions that benefit college students and our public universities.
Students and Families
Over the years, many students and families have benefited from being able to lessen the cost of a college degree with various tax deductions and credits. The House of Representatives has passed its proposed overhaul of the US tax code that repeals or eliminates many of these tax incentives that help make higher education more attainable. The Senate’s version of the bill preserves many of those benefits that have helped students and their families over the years. However, both versions eliminate the deduction of college-age dependents, which under current law allows taxpayers to deduct $4,050 from income for each dependent age 19 to 23 who are full-time college students.
Among the deductions the University advocates maintaining are:
- The Student Loan Interest Deduction Current law allows an individual earning less than $80,000 (or $160,000 for married couples filing jointly) to claim up to $2,500 as a deduction for interest paid on qualified education loans. The House proposal would repeal this deduction and has no replacement for it. The Senate bill maintains current law.
- The Qualified Tuition Reduction Current law allows universities to provide tax‐free undergraduate‐level tuition waivers or reimbursements to employees, spouses, and their dependents. It also allows tax‐free tuition of individuals employed as graduate‐level teaching and research assistants. The House bill repeals this explosion while the Senate maintains current law.
- Exclusion for Employer‐Provided Education Assistance Under current law, employer‐provided education assistance is excluded from income, limited to $5,250 per year. The House eliminates this exclusion while the Senate maintains current law.
- The Deduction of College-Age Dependents Current law allows taxpayers to deduct $4,050 from income for each dependent age 19 to 23 who are full-time college students. Both the House and Senate bill repeal this deduction.
What is of equal concern to colleges and universities is the significant anticipated decline in charitable giving due to doubling the standard deduction threshold in both the House and Senate bills. Each year, charitable contributions fund millions of dollars in endowed scholarships, new facilities, and help support key programs in every aspect of the university—from athletics, to academics, to outreach.
Over the next ten years, the University of Tennessee could see a loss of individual gift revenue of roughly $28,985,396 if these provisions are enacted.
To address this, UT joins the charitable and non-profit communities in urging lawmakers to establish a new universal charitable deduction as part of tax reform. Regardless of one’s income, this would allow taxpayers to deduct their charitable gifts from income before they determine whether to take the standard deduction or itemize their tax returns.
Student-Athletes and Athletic Programs
College athletics programs across the country also are concerned about a provision repealing the charitable deduction for the right to purchase tickets for athletic events—known as the “80/20” rule. Under current law, donors are permitted to deduct 80 percent of the charitable contribution made in order to purchase athletic tickets. At UT, these gifts are significant and go directly to help provide student-athlete scholarships, facilities support, and operations for all our athletics teams and programs on every UT campus. Repealing this deduction will severely compromise the contributions these programs make to our universities, our communities, and our state.
We Need Your Help: Take Action Now
As the Senate prepares to vote on their proposal, we ask you to contact your Senators and thank them for maintaining many of the current provisions that benefit college students, their families, and public universities. Urge them to support changes to the Senate bill that would restore the tax deduction for college-age dependents and the charitable deduction for the right to purchase athletic tickets. Ask them to support the creation of a new universal charitable deduction as part of tax reform, so that all Americans have an incentive to give back.
For a side-by-side comparison of the bills’ higher education provisions, click here.