Important to Research Universities
Expired December 31, 2013
Above-the-Line Deduction for Qualified Tuition and Related Expenses (IRC Sec. 222): The maximum deduction is $4,000 for an individual earning up to $65,000 ($130,000 for a joint filer), phasing down to $2,000 for those earning $80,000 ($160,000 for a joint filer). Qualified education expenses limited to required tuition and fees. Deduction unavailable if use American Opportunity Tax Credit or Lifetime Learning Credit. Cannot deduct qualified education expenses that have been paid with scholarship, grant (including Pell), assistance provided by an employer, or educational savings accounts (e.g. 529, Coverdell). In 2009, 1.7 million taxpayers claimed the tuition deduction. *Cost = $1.7 billion over 10 years.
IRA Charitable Rollover (IRC Sec. 408): IRA Rollover permits IRA owners starting at age 70½ to make tax-free charitable gifts totaling up to $100,000 per year from their IRAs directly to eligible charities, including colleges and universities. *Cost = $1.3 billion over 10 years.
R&D Tax Credit (IRC Sec. 41): The federal Research and Development Tax Credit is a business tax credit for qualified research expenses that can be deducted from overall corporate income taxes. Qualified research expenses include: certain labor and wage costs for performing research activities “in-house;” certain supplies used in conducting research; and a percentage of costs associated with “contract research expenses.” The credit only applies to research performed in the U.S. The traditional R&D tax credit provides a 20 percent credit for qualified research expenses that exceed the taxpayer’s base amount. In lieu of the traditional credit, businesses may elect to claim the Alternative Simplified Credit, which provides a 14 percent credit for qualified research in excess of 50 percent of a company’s prior three-year average qualified research expenses. Under certain circumstances, businesses can also claim a credit if they fund qualified research at another organization such as a university or other research organizations. In such instances, a business can claim only 65 percent or 75 percent (as compared to 100 percent for in-house R&D expenditures) of qualifying expenditures toward the tax credit. The 75 percent rate applies only to qualified research organizations (such as universities or research consortiums), which are tax-exempt entities organized primarily to conduct scientific research and which are not private foundations. *Cost = $14.3 billion over 10 years.
Expiring December 31, 2017
American Opportunity Tax Credit (AOTC) (IRC Sec. 25A): The maximum tax credit is $2,500 per eligible student for qualified education expenses for an individual earning up to $80,000 ($160,000 for joint filing), phasing down to $1,875 for those earning $90,000 ($180,000 for joint filing). Qualified education expenses limited to required tuition, fees, and course materials. Tax credit is 40 percent refundable. Available only for the first four years of postsecondary education. Tax credit unavailable if using Lifetime Learning Credit or tuition deduction. Cannot apply tax credit to qualified education expenses that have been paid with scholarship, grant (including Pell), assistance provided by an employer, or educational savings accounts (e.g. 529, Coverdell). Without extension, AOTC reverts back to the Hope Scholarship tax credit benefit of $1,800 with narrower eligible education expenses and shorter period of eligible use, lower income thresholds, and no refundability. In 2009, 9 million taxpayers claimed the AOTC. *Cost = $67.3 billion over 10 years.
*Cost estimates from Joint Committee on Taxation report JCX-1-13, January 2013.