DEDUCTION FOR HIGHER EDUCATION EXPENSES.

SEC. 431. DEDUCTION FOR HIGHER EDUCATION EXPENSES. (a) Deduction Allowed.—Part VII of subchapter B of chapter 1 (relating to additional itemized deductions for individuals) is amended by redesignating section 222 as section 223 and by inserting after section 221 the following: “SEC. 222. QUALIFIED TUITION AND REIATED EXPENSES. “(a) Allowance of Deduction.—In the case of an individual, there shall be allowed as a deduction an amount equal to the qualified tuition and related expenses paid by the taxpayer during the taxable year.115 STAT. 67 “(b) Dollar Limitations.— “(1) In general.—The amount allowed as a deduction under subsection (a) with respect to the taxpayer for any taxable year shall not exceed the applicable dollar limit. “(2) Applicable dollar limit.— “(A) 2002 AND 2003.—In the case of a taxable year beginning in 2002 or 2003, the applicable dollar limit shall be equal to— “(i) in the case of a taxpayer whose adjusted gross income for the taxable year does not exceed $65,000 ($130,000 in the case of a joint return), $3,000, and— “(ii) in the case of any other taxpayer, zero. “(B) 2004 and 2005.—In the case of a taxable year beginning in 2004 or 2005, the applicable dollar amount shall be equal to— “(i) in the case of a taxpayer whose adjusted gross income for the taxable year does not exceed $65,000 ($130,000 in the case of a joint return), $4,000, “(ii) in the case of a taxpayer not described in clause (i) whose adjusted gross income for the taxable year does not exceed $80,000 ($160,000 in the case of a joint return), $2,000, and “(iii) in the case of any other taxpayer, zero. “(C) Adjusted gross income.—For purposes of this paragraph, adjusted gross income shall be determined— “(i) without regard to this section and sections 911, 931, and 933, and “(ii) after application of sections 86, 135, 137, 219, 221, and 469. “(c) No Double Benefit.— “(1) In general.—No deduction shall be allowed under subsection (a) for any expense for which a deduction is allowed to the taxpayer under any other provision of this chapter. “(2) Coordination with other education incentives.— “(A) Denial of deduction if credit elected.—No deduction shall be allowed under subsection (a) for a taxable year with respect to the qualified tuition and related expenses with respect to an individual if the taxpayer or any other person elects to have section 25A apply with respect to such individual for such year. “(B) Coordination with exclusions.—The total amount of qualified tuition and related expenses shall be reduced by the amount of such expenses taken into account in determining any amount excluded under section 135, 529(c)(1), or 530(d)(2). For purposes of the preceding sentence, the amount taken into account in determining the amount excluded under section 529(c)(1) shall not include that portion of the distribution which represents a return of any contributions to the plan. “(3) Dependents.—No deduction shall be allowed under subsection (a) to any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which such individual’s taxable year begins. “(d) Definitions and Special Rules.—For purposes of this section—115 STAT. 68 “(1) Qualified tuition and related expenses.—The term ‘qualified tuition and related expenses’ has the meaning given such term by section 25A(f). Such expenses shall be reduced in the same manner as under section 25A(g)(2). “(2) Identification requirement.—No deduction shall be allowed under subsection (a) to a taxpayer with respect to the qualified tuition and related expenses of an individual unless the taxpayer includes the name and taxpayer identification number of the individual on the return of tax for the taxable year. “(3) Limitation on taxable year of deduction.— “(A) In general.—A deduction shall be allowed under subsection (a) for qualified tuition and related expenses for any taxable year only to the extent such expenses are in connection with enrollment at an institution of higher education during the taxable year. “(B) Certain prepayments allowed.—Subparagraph (A) shall not apply to qualified tuition and related expenses paid during a taxable year if such expenses are in connection with an academic term beginning during such taxable year or during the first 3 months of the next taxable year. “(4) No deduction for married individuals filing separate returns.—If the taxpayer is a married individual (within the meaning of section 7703), this section shall apply only if the taxpayer and the taxpayer’s spouse file a joint return for the taxable year. “(5) Nonresident aliens.—If the taxpayer is a nonresident alien individual for any portion of the taxable year, this section shall apply only if such individual is treated as a resident alien of the United States for purposes of this chapter by reason of an election under subsection (g) or (h) of section 6013. “(6) Regulations.—The Secretary may prescribe such regulations as may be necessary or appropriate to carry out this section, including regulations requiring recordkeeping and information reporting. “(e) Termination.—This section shall not apply to taxable years beginning after December 31, 2005.”. (b) Deduction Allowed in Computing Adjusted Gross Income.—Section 62(a) is amended by inserting after paragraph 17) the following: “(18) Higher education expenses.—The deduction allowed by section 222.”. (c) Conforming Amendments.— (1) Sections 86(b)(2), 135(c)(4), 137(b)(3), and 219(g)(3) are each amended by inserting “222,” after “221,”. (2) Section 221(b)(2)(C) is amended by inserting “222,” before “911”. (3) Section 469(i)(3)(F) is amended by striking “and 221” and inserting “, 221, and 222”. (4) The table of sections for part VII of subchapter B of chapter 1 is amended by striking the item relating to section 222 and inserting the following; “Sec. 222. Qualified tuition and related expenses. “Sec. 223. Cross reference.”. 115 STAT. 69 (d) Effective Date.—The amendments made by this section shall apply to payments made in taxable years beginning after December 31, 2001.