GRADUATE Act
Officially: “GRADUATE Act” Read the full text
What it does
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1Short title
This section states that the Act may be called the Generating Relief for Academic Debt Using Assisted Tax Efficiency Act, or the GRADUATE Act.
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1. Short title This Act may be cited as the Generating Relief for Academic Debt Using Assisted Tax Efficiency Act or the GRADUATE Act .
2Education loan deduction
This section would rewrite the tax code's student loan deduction under section 221 of the Internal Revenue Code and rename that section from Interest on education loans to Education loans. The rewritten deduction would let an individual deduct the full amount paid during the tax year on a qualified education loan, covering both principal and interest, not interest alone. The maximum deduction would be $10,000, plus $500 for each dependent the taxpayer has for that year. For higher earners, that maximum would be reduced, but never below zero: the reduction equals the deduction otherwise allowed (after the dollar cap just described), multiplied by the amount by which the taxpayer's modified adjusted gross income exceeds $125,000 (or $250,000 for a joint return), divided by $25,000 (or $50,000 for a joint return). As a result, the deduction phases out completely once modified adjusted gross income exceeds the threshold by that full range of $25,000, or $50,000 for a joint return. For this purpose, modified adjusted gross income means adjusted gross income figured without regard to this deduction and without regard to sections 85(c), 911, 931, and 933 of the tax code, but after applying sections 86, 135, 137, 219, and 469. This section would also change the dollar figures and years used in section 221(f)(1): the year after which the referenced adjustments apply would move from 2002 to 2026, the dollar amounts of $50,000 and $100,000 would become $125,000 and $250,000, and the reference year in subparagraph (B) would move from 2001 to 2025. Separately, this section would amend section 62(a)(17) of the tax code so that item reads Education loan payments: The deduction allowed by section 221, continuing to reference the section 221 deduction under an updated label matching the broadened deduction. These changes would apply to tax years beginning after December 31, 2025.
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2. Education loan deduction (a) In general Section 221 of the Internal Revenue Code of 1986 is amended— (1) in the heading, by striking Interest on education loans and inserting Education loans , (2) by amending subsection (a) to read as follows: (a) Allowance of deduction In the case of an individual, there shall be allowed as a deduction for the taxable year an amount equal to the amounts paid by the taxpayer during the taxable year on any qualified education loan. , (3) by amending subsection (b) to read as follows: (b) Maximum deduction (1) In general Except as provided in paragraph (2), the deduction allowed by subsection (a) for the taxable year shall not exceed an amount equal to the sum of— (A) $10,000, plus (B) $500 multiplied by the number of dependents of the taxpayer for such taxable year. (2) Limitation based on modified adjusted gross income (A) In general 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). (B) Amount of reduction 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— (i) the excess of— (I) the taxpayer’s modified adjusted gross income for such taxable year, over (II) $125,000 ($250,000 in the case of a joint return), bears to (ii) $25,000 ($50,000 in the case of a joint return). (C) Modified adjusted gross income The term modified adjusted gross income means adjusted gross income determined— (i) without regard to this section and sections 85(c), 911, 931, and 933, and (ii) after application of sections 86, 135, 137, 219, and 469. , and (4) in subsection (f)(1)— (A) by striking after 2002 and inserting after 2026 , (B) by striking $50,000 and $100,000 and inserting $125,000 and $250,000 , and (C) in subparagraph (B), by striking calendar year 2001 and inserting calendar year 2025 . (b) Conforming amendment Section 62(a)(17) of such Code is amended to read as follows: (17) Education loan payments The deduction allowed by section 221. . (c) Effective date The amendment made by this section shall apply to taxable years beginning after December 31, 2025.
Where it is
In the House.