Secretary of Education Rod Paige today highlighted President Bush's efforts to provide more tax relief for our families, our teachers and our schools.

"President Bush has fought for and won tax changes that will help our schools, our students and our families this year and for years to come," Paige said. "Because of his efforts? and the bipartisan work of Congress?families will keep more of their hard-earned money to pay for college, our schools will have help with renovation projects, and teachers will be able to deduct certain expenses."

In his weekly radio address, President Bush focused on his administration's efforts to provide tax relief to Americans.

"This year, your tax rates are lower and you will keep more of your hard-earned money to spend or save, as you see fit," President Bush said. "Last year, I signed a tax relief bill that will continue to reduce federal taxes by more than a trillion dollars over the next 10 years."

The president added: "Tax relief helps the working people of our country with more money to provide for their families and pay their bills. And perhaps the best news of all is that even more relief is on the way for many years to come."

The following tax code changes enacted during the Bush administration support America's families, teachers and schools:

• Increase and expand education savings accounts: The annual contribution limit to Coverdell education savings accounts (education IRAs) has been increased from $500 to $2,000. The income phase-out range for joint returns has been increased to between $190,000 and $220,000, twice the phase-out range for single returns. Distributions are now tax-free if used either for qualifying higher education expenses or qualifying expenses for elementary and secondary education at public, private and religious schools.
• Allow tax-free distributions from Qualified State Tuition Plans: Distributions from these savings plans for higher education are now tax-free if used for qualifying higher education expenses. In addition, private colleges and universities are allowed to establish similar plans.
• Allow deductions for higher education expenses: An above-the-line deduction from gross income will be allowed for qualifying higher education expenses of up to $3,000 for taxable years 2002 and 2003. The deduction is limited to taxpayers with an Adjusted Gross Income (AGI) of $65,000 or less ($130,000 for joint returns). For 2004 and 2005, the maximum deduction will increase to $4,000, and a deduction of up to $2,000 will be available for taxpayers with AGI of between $65,000 and $80,000 (between $130,000 and $160,000 for a joint return). The provision expires after 2005.
• Permanent exclusion for employer-provided education assistance: Under a temporary provision, prior law allowed an exclusion from employee income of up to $5,250 of employer-provided education assistance below the graduate level. The provision was made permanent and expanded to apply to graduate-level education.
• Modify student loan interest deduction: The prior law above-the-line deduction for up to $2,500 of interest paid on student loans was modified to eliminate a 60-month limit on such deductions and to include voluntary payments of interest. The income phase-out range for this deduction was increased to between $50,000 and $65,000 of AGI (between $100,000 and $130,000 for joint returns).
• Provide tax relief for awards under certain federal health education programs: Awards received under the National Health Service Corps Scholarship Program and the Armed Forces Health Professions Scholarship and Financial Assistance Program may now be excluded from income as qualified scholarships without regard to the recipient's future service obligation.
• Expand the scope of the small issuer exception from arbitrage rebates for certain school bonds: The size of a tax-exempt bond issued by a small governmental unit that is exempt from arbitrage rebate requirements has been increased to $15 million if at least $10 million of the issue is used for public schools.
• Allow private activity bonds for public school construction: Public schools owned by private for-profit corporations can now be financed with tax-exempt bonds pursuant to agreements with state or local education agencies.
• Allow teachers to deduct out-of-pocket classroom expenses: Teachers and other educators in public, private and religious elementary and secondary schools will now be able to take an above-the-line deduction for classroom expenses they incur of up to $250 per year. To be eligible the taxpayer must be a teacher, instructor, counselor, principal or aide for at least 900 hours during a school year, and the expense must be incurred in connection with a trade or business. The provision is effective for 2002 and 2003.
• Authority to issue Qualified Zone Academy Bonds: Additional authority to issue up to $400 million of Qualified Zone Academy Bonds was created for 2002 and 2003. The provision had expired at the end of 2001. The total authority is divided among the states. Interest on these bonds is paid in the form of a tax credit to their holder, usually a commercial bank. The issuing school district or other governmental unit is responsible for repaying principal. The bond proceeds can be used for rehabilitation of existing school buildings and certain other purposes but not for new construction.

The president's proposed FY 2003 budget will provide additional tax relief for America's families.

The budget contains a proposal for a refundable tax credit for certain costs of attending a different school for pupils assigned to failing public schools.

A refundable tax credit would be allowed for 50 percent of up to $5,000 of qualifying elementary or secondary school expenses incurred with respect to enrolling a qualifying student in a qualifying school. Students would qualify if the school they normally would attend is a public school determined by the local school district as not having made "adequate yearly progress" under the terms of the No Child Left Behind Act of 2001.

The proposed FY 2003 budget also would allow teachers to deduct out-of-pocket classroom expenses. The proposal is similar to the provision enacted as part of the Job Creation and Worker Assistance Act of 2002 except that the proposed maximum deduction would be $400 per year and would be permanent (effective beginning in 2004).

For more information, visit www.whitehouse.gov or www.treasury.gov.

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