§221 — Interest on education loans
32 cases·4 followed·1 distinguished·27 cited—12% support
Statute Text — 26 U.S.C. §221
In the case of an individual, there shall be allowed as a deduction for the taxable year an amount equal to the interest paid by the taxpayer during the taxable year on any qualified education loan.
Except as provided in paragraph (2), the deduction allowed by subsection (a) for the taxable year shall not exceed $2,500.
The amount which would (but for this paragraph) be allowable as a deduction under this section shall be reduced (but not below zero) by the amount determined under subparagraph (B).
The amount determined under this subparagraph is the amount which bears the same ratio to the amount which would be so taken into account as—
the excess of—
the taxpayer’s modified adjusted gross income for such taxable year, over
$50,000 ($100,000 in the case of a joint return), bears to
$15,000 ($30,000 in the case of a joint return).
The term “modified adjusted gross income” means adjusted gross income determined—
without regard to this section and sections 85(c)
1
1 So in original. Probably should be followed by a comma.
911, 931, and 933, and
after application of sections 86, 135, 137, 219, and 469.
No deduction shall be allowed by this section to an individual for the taxable year if a deduction under section 151 with respect to such individual is allowed to another taxpayer for the taxable year beginning in the calendar year in which such individual’s taxable year begins.
For purposes of this section—
The term “qualified education loan” means any indebtedness incurred by the taxpayer solely to pay qualified higher education expenses—
which are incurred on behalf of the taxpayer, the taxpayer’s spouse, or any dependent of the taxpayer as of the time the indebtedness was incurred,
which are paid or incurred within a reasonable period of time before or after the indebtedness is incurred, and
which are attributable to education furnished during a period during which the recipient was an eligible student.
Such term includes indebtedness used to refinance indebtedness which qualifies as a qualified education loan. The term “qualified education loan” shall not include any indebtedness owed to a person who is related (within the meaning of section 267(b) or 707(b)(1)) to the taxpayer or to any person by reason of a loan under any qualified employer plan (as defined in section 72(p)(4)) or under any contract referred to in section 72(p)(5).
The term “qualified higher education expenses” means the cost of attendance (as defined in section 472 of the Higher Education Act of 1965,
20 U.S.C. 1087
ll
, as in effect on the day before the date of the enactment of the Taxpayer Relief Act of 1997) at an eligible educational institution, reduced by the sum of—
the amount excluded from gross income under section 127, 135, 529, or 530 by reason of such expenses, and
the amount of any scholarship, allowance, or payment described in section 25A(g)(2).
For purposes of the preceding sentence, the term “eligible educational institution” has the same meaning given such term by section 25A(f)(2), except that such term shall also include an institution conducting an internship or residency program leading to a degree or certificate awarded by an institution of higher education, a hospital, or a health care facility which offers postgraduate training.
The term “eligible student” has the meaning given such term by section 25A(b)(3).
The term “dependent” has the meaning given such term by section 152 (determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof).
No deduction shall be allowed under this section for any amount for which a deduction is allowable under any other provision of this chapter, or for which an exclusion is allowable under section 127 to the taxpayer by reason of the payment by the taxpayer’s employer of any indebtedness on a qualified education loan of the taxpayer. The deduction otherwise allowable under subsection (a) (prior to the application of subsection (b)) to the taxpayer for any taxable year shall be reduced (but not below zero) by so much of the distributions treated as a qualified higher education expense under section 529(c)(9) with respect to loans of the taxpayer as would be includible in gross income under section 529(c)(3)(A) for such taxable year but for such treatment.
If the taxpayer is married at the close of the taxable year, the deduction shall be allowed under subsection (a) only if the taxpayer and the taxpayer’s spouse file a joint return for the taxable year.
Marital status shall be determined in accordance with section 7703.
In the case of a taxable year beginning after 2002, the $50,000 and $100,000 amounts in subsection (b)(2) shall each be increased by an amount equal to—
such dollar amount, multiplied by
the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting “calendar year 2001” for “calendar year 2016” in subparagraph (A)(ii) thereof.
If any amount as adjusted under paragraph (1) is not a multiple of $5,000, such amount shall be rounded to the next lowest multiple of $5,000.
Treasury Regulations
- Treas. Reg. §Treas. Reg. §1.221-1 Deduction for interest paid on qualified education loans after December 31, 2001
- Treas. Reg. §Treas. Reg. §1.221-1(a) In general—(1) Applicability.
- Treas. Reg. §Treas. Reg. §1.221-1(b) Eligibility—(1) Taxpayer must have a legal obligation to make interest payments.
- Treas. Reg. §Treas. Reg. §1.221-1(c) Maximum deduction.
- Treas. Reg. §Treas. Reg. §1.221-1(d) Limitation based on modified adjusted gross income—(1) In general.
- Treas. Reg. §Treas. Reg. §1.221-1(e) Definitions—(1) Eligible educational institution.
- Treas. Reg. §Treas. Reg. §1.221-1(f) Interest—(1) In general.
- Treas. Reg. §Treas. Reg. §1.221-1(g) Additional Rules—(1) Payment of interest made during period when interest payment not required.
- Treas. Reg. §Treas. Reg. §1.221-1(h) Effective date.
- Treas. Reg. §Treas. Reg. §1.221-1(i) Qualified stated interest (as defined in § 1.
- Treas. Reg. §Treas. Reg. §1.221-1(v) Refinanced and consolidated indebtedness—(A) In general.
- Treas. Reg. §Treas. Reg. §1.221-2 Deduction for interest due and paid on qualified education loans before January 1, 2002
- Treas. Reg. §Treas. Reg. §1.221-2(a) In general.
- Treas. Reg. §Treas. Reg. §1.221-2(b) Eligibility—(1) Taxpayer must have a legal obligation to make interest payments.
- Treas. Reg. §Treas. Reg. §1.221-2(c) Maximum deduction.
- Treas. Reg. §Treas. Reg. §1.221-2(d) Limitation based on modified adjusted gross income—(1) In general.
- Treas. Reg. §Treas. Reg. §1.221-2(e) §1.221-2(e)
- Treas. Reg. §Treas. Reg. §1.221-2(f) Definitions—(1) Eligible educational institution.
- Treas. Reg. §Treas. Reg. §1.221-2(g) Denial of double benefit.
- Treas. Reg. §Treas. Reg. §1.221-2(h) Interest—(1) In general.
- Treas. Reg. §Treas. Reg. §1.221-2(i) Special rules regarding 60-month limitation—(1) Refinancing.
- Treas. Reg. §Treas. Reg. §1.221-2(j) Effective date.
- Treas. Reg. §Treas. Reg. §1.221-2(v) Refinanced and consolidated indebtedness—(A) In general.
32 Citing Cases
For tax year 1998, petitioners’ modified AGI was $101,471.67.2 Because petitioners’ modified AGI for 1998 is more than $75,000, we hold that interest paid on petitioners’ qualified education loan is not deductible under section 221(b).
(Part 3) 2687; (3) entitled to a charitable contribution deduction under section 170, and (4) entitled to an education loan interest - 2 - deduction under section 221.1 Petitioner resided in New York, New York, at the time the petition was filed.
For taxpayers filing a 198.4 joint return, section 221 allows ual-income married couples a deduction equal to 10 percent of the lesser of $30,000 or the "qualified earned income of the spouse with the lower qualified earned income for the t xable yëar." Estate of Johnson v.
In the case of a joint return for 1983 through 1986, section 221 allows a deduction for two-earner married couples equal to 10 percent of the lesser of $30,000 or the “qualified earned income” of the spouse with the lower qualified earned income for - 100 - the taxable year.
In the case of a joint return for 1983 through 1986, section 221 allows a deduction for two-earner married couples equal to 10 percent of the lesser of $30,000 or the “qualified earned income” of the spouse with the lower qualified earned income for - 100 - the taxable year.
7 (A) interest paid or accrued on indebtedness properly allocable to a trade or business (other than the trade or business of performing services as an employee), (B) any investment interest (within the meaning of subsection (d)), (C) any interest which is taken into account under section 469 in computing income or loss from a passive activity of the taxpayer, (D) any qualified residence interest (within the meaning of paragraph (3)), (E) any interest payable under section 6601 on any unpaid por
- 7 - [*7] circumstances described in section 137; (4) the section 199 deduction for income attributable to domestic production activities; (5) the section 219 deduction for qualified contributions to a retirement plan; (6) the section 221 deduction for education loan interest payments; (7) the section 222 deduction for qualified tuition expenses; and (8) any passive activity loss (including any passive activity loss allowable under the section 469(c)(7) exception for taxpayers engaged in a real
For taxpayers filing a 198.4 joint return, section 221 allows ual-income married couples a deduction equal to 10 percent of the lesser of $30,000 or the "qualified earned income of the spouse with the lower qualified earned income for the t xable yëar." Estate of Johnson v.
1087ll(2) (2000), provides that the term “cost of attendance” means an allowance for transportation as determined by the institution.
586). Petitioner is entitled to deduct the amount of 25It might be objected that Crocus's right to compensation would have to be established under the laws of the place of performance, in this case Russia. See Restatement (Second), Conflict of Laws, sec. 221 (1971). The issue in this case is not whether Crocus has a right to recover payments of compensation from petitioner under theories of agency or restitution. Rather, we must decide whether petitioner or ECI paid Crocus for its services from
Finally, in section 163(h)(2)(F), Congress refers to section 221 for a definition of interest on educational loans.
Finally, in section 163(h)(2)(F), Congress refers to section 221 for a definition of interest on educational loans.
221 allowing a deduction for interest paid on educational loans was not in effect during the year in issue. That section was added by the Taxpayer Relief Act of 1997, Pub. L. 105-34, sec. 202(a), 111 Stat. 806, effective for interest payments due and paid on any qualified education loan after December 31, 1997. In addition, sec. 163(h)(2)(F) w
0, $382,620, and $825,548 in 1983, 1984, and 1985, respectively. 2Respondent disallowed $88,236 of petitioners' 1983 net operating loss carryover deduction. 3Respondent allowed a deduction for two-earner married couples of $120 for 1983 pursuant to sec. 221. 4Respondent determined an increase in petitioners' capital gains of $6,636 for 1983. 5Respondent disallowed deductions claimed by petitioners for (continued...) - 3 - Petitioners concede the adjustments made by respondent for unreported gros
ipulation) “concession” for 1984 would increase petitioner’s deficiency for this year. Respondent has not asked for an increased deficiency for 1984; see sec. 6214(a). 3 In the notice of deficiency, respondent disallowed Schedule W deductions under sec. 221 (the two-earner deduction) for 1983, 1984, and 1985. Respondent also determined that petitioner’s taxable income should be increased by $1,400 for 1987 for the value of tax return preparation services paid on behalf of petitioner and Betsy. S