Article 4
Tutoring Tax Incentives Still Alive in New Congress
By: Jeff Trinca, Vice President, Van Scoyoc Associates
Published: March 18, 2011
Over the last year, Congress and the Administration have begun the debate over reforming the Internal Revenue Code. Policymakers in Congress and the Administration have voiced their interest in eliminating deductions and credits, and using the increased tax receipts to either lower the tax rates for individuals or consolidate many complex rules into one.
What is clear is that tax reform will create winners and losers. The question for those of us in education is how do we position ourselves best to be one of the winners?
The education incentives in the tax code are ripe for reform. Today under the current tax code, a family is presented with a dizzying array of education-related benefits, each with varying degrees of tax benefit, eligibility and allowable expenses. These tax incentives have arisen haphazardly over the years and through their complexity and sheer number have become a barrier to use for many middle class taxpayers. A number of well-placed Members of Congress have called specifically for this area of the code to be reformed.
So, what would reform look like and how would it help private tutoring?
Redundant tax benefits would be consolidated under one Family Education Savings Plan governed loosely by the current rules for 529 plans. As under current law, the taxpayers could make unlimited after-tax contributions to the plan and the investment return would not be taxable and payments for qualifying education costs would not be taxed. Additionally, the code would allow the following new tax incentives:
In short, our strategy is to anticipate a major rewrite of the tax code and join with other education constituencies to remake many complicated education tax benefits into a simpler mechanism for assisting middle class taxpayers educate and care for their family members.
Published: March 18, 2011
Over the last year, Congress and the Administration have begun the debate over reforming the Internal Revenue Code. Policymakers in Congress and the Administration have voiced their interest in eliminating deductions and credits, and using the increased tax receipts to either lower the tax rates for individuals or consolidate many complex rules into one.
What is clear is that tax reform will create winners and losers. The question for those of us in education is how do we position ourselves best to be one of the winners?
The education incentives in the tax code are ripe for reform. Today under the current tax code, a family is presented with a dizzying array of education-related benefits, each with varying degrees of tax benefit, eligibility and allowable expenses. These tax incentives have arisen haphazardly over the years and through their complexity and sheer number have become a barrier to use for many middle class taxpayers. A number of well-placed Members of Congress have called specifically for this area of the code to be reformed.
So, what would reform look like and how would it help private tutoring?
Redundant tax benefits would be consolidated under one Family Education Savings Plan governed loosely by the current rules for 529 plans. As under current law, the taxpayers could make unlimited after-tax contributions to the plan and the investment return would not be taxable and payments for qualifying education costs would not be taxed. Additionally, the code would allow the following new tax incentives:
- Up to $5,000 annual before-tax salary reduction contributions;
- Employer matching up to the full $5,000 (non-taxable to the employee and fully deductible for the employer); and
- The account could be spent tax-free on qualifying education expenses, which would include college costs (as governed under current rules), K-12- expenses associated with furtherance of academic enrichment, including special needs services, books, required school supplies, travel and after school activities costs, tutoring, and college preparation courses, job retraining, and dependent care costs (as governed under current rules).
In short, our strategy is to anticipate a major rewrite of the tax code and join with other education constituencies to remake many complicated education tax benefits into a simpler mechanism for assisting middle class taxpayers educate and care for their family members.
About the Contributor
Jeff Trinca
Jeff Trinca is one of the founding Vice President's of Van Scoyoc Associates. He has served in this capacity for over 20 years. Mr. Trinca has played a major role in the ebb and flow of taxation policy since the Reagan Administration, first working within government on Capitol Hill and now helping others deal with the Federal Government. During his time on the Hill, Mr. Trinca provided advice and counsel on all tax and budget bills working their way through Congress, including the Tax Reform Act of 1986, the Consolidated Omnibus Budget Reconciliation Act of 1986, the Omnibus Budget Reconciliation Act of 1987, the Technical and Miscellaneous Revenue Act of 1988, the Omnibus Budget Reconciliation Act of 1989, and the Omnibus Budget Reconciliation Act of 1990. Mr. Trinca is a graduate of the University of California, Davis, received his juris doctorate from The George Washington University National Law Center in Washington, D.C., and is a member of the District of Columbia Bar.