DES MOINES, Iowa — President Trump says the Senate tax reform bill is going to benefit many Americans. The bill aims to keep businesses competitive while eliminating “the student loan interest deduction,” which was a major tax break for college graduates like Derek Vogel.
DES MOINES, Iowa — President Trump says the Senate tax reform bill is going to benefit many Americans.
The bill aims to keep businesses competitive while eliminating “the student loan interest deduction,” which was a major tax break for college graduates like Derek Vogel.
“I am definitely worried about that, because I get that tax credit right now. I’ve got $135,000 of student loan debt. That’s a huge deal for me,” Vogel said.
National numbers show Vogel is among 12 million others to use the deduction in 2015.
“I would have to pay in several hundred dollars a year in taxes, but because of that tax credit, it’s basically zero,” Vogel said.
As it stands now, Vogel can deduct up to $2,500 in interest paid on his student loans.
“The current system is better than whatever is being cobbled together right now in the middle of the night,” Vogel said.
But Drake University accounting professor Stephan Gara said despite hitting students in the pocket book, some parts of the bill help families with small children.
“Removing the personal and dependency exemptions, which are about $4,000 you get for yourself, your spouse, and your children, they are replacing it with an expanded child tax credit, which is great, except the child tax credit caps out at 17 years old,” Gara said.
Gara said there is a silver lining to this proposal.
“The catch is that the rates are going down, so the end result basically is you might lose a lot of deductions and exemptions so your level of income on the return will go up, but at the same time the rates are going down, so it’s probably a wash,” Gara said.
That’s still uncertain because the Senate and House must hammer out differing tax proposals. In the meantime, Vogel is preparing for his student loan deduction to be taken away.
“Well, I am not going to be able to drink nearly as many of these coffees, that’s for sure,” Gara said.
The president hopes to sign a tax reform bill by Christmas, but professor Gara believes this bill, if signed into law, will need to be adjusted in 2018.
Filed in: News
Topics: taxes
