
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document affected by Public Law 107-16 Section 402(b)(2)(B)]
[Document affected by Public Law 107-16 Section 412(a)(1)]
[Document affected by Public Law 107-16 Section 412(b)(1),]
[Document affected by Public Law 107-16 Section 431(c)(2)]
[Document affected by Public Law 107-16 Section 412(a)(3)]
[Document affected by Public Law 107-16 Section 412(b)(3)]
[CITE: 26USC221]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
               Subchapter B--Computation of Taxable Income
 
        PART VII--ADDITIONAL ITEMIZED DEDUCTIONS FOR INDIVIDUALS
 
Sec. 221. Interest on education loans


(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 interest paid by the 
taxpayer during the taxable year on any qualified education loan.

(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 the amount 
    determined in accordance with the following table:

  In the case of taxable years                                The dollar
    beginning in:                                             amount is:
              1998..............................                 $1,000 
              1999..............................                 $1,500 
              2000..............................                 $2,000 
              2001 or thereafter................                 $2,500.
       (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) $40,000 ($60,000 in the case of a joint 
                return), bears to

                (ii) $15,000.

        (C) Modified adjusted gross income

            The term ``modified adjusted gross income'' means adjusted 
        gross income determined--
                (i) without regard to this section and sections 911, 
            931, and 933, and
                (ii) after application of sections 86, 135, 137, 219, 
            and 469.

(c) Dependents not eligible for deduction

    No deduction shall be allowed by this section to an individual for 
the taxable year if a deduction under section 151 with respect to such 
individual is allowed to another taxpayer for the taxable year beginning 
in the calendar year in which such individual's taxable year begins.

(d) Limit on period deduction allowed

    A deduction shall be allowed under this section only with respect to 
interest paid on any qualified education loan during the first 60 months 
(whether or not consecutive) in which interest payments are required. 
For purposes of this paragraph, any loan and all refinancings of such 
loan shall be treated as 1 loan. Such 60 months shall be determined in 
the manner prescribed by the Secretary in the case of multiple loans 
which are refinanced by, or serviced as, a single loan and in the case 
of loans incurred before the date of the enactment of this section.

(e) Definitions

    For purposes of this section--

                    (1) Qualified education loan

        The term ``qualified education loan'' means any indebtedness 
    incurred by the taxpayer solely to pay qualified higher education 
    expenses--
            (A) which are incurred on behalf of the taxpayer, the 
        taxpayer's spouse, or any dependent of the taxpayer as of the 
        time the indebtedness was incurred,
            (B) which are paid or incurred within a reasonable period of 
        time before or after the indebtedness is incurred, and
            (C) which are attributable to education furnished during a 
        period during which the recipient was an eligible student.

    Such term includes indebtedness used to refinance indebtedness which 
    qualifies as a qualified education loan. The term ``qualified 
    education loan'' shall not include any indebtedness owed to a person 
    who is related (within the meaning of section 267(b) or 707(b)(1)) 
    to the taxpayer or to any person by reason of a loan under any 
    qualified employer plan (as defined in section 72(p)(4)) or under 
    any contract referred to in section 72(p)(5).

               (2) Qualified higher education expenses

        The term ``qualified higher education expenses'' means the cost 
    of attendance (as defined in section 472 of the Higher Education Act 
    of 1965, 20 U.S.C. 1087ll, as in effect on the day before the date 
    of the enactment of this Act) at an eligible educational 
    institution, reduced by the sum of--
            (A) the amount excluded from gross income under section 127, 
        135, or 530 by reason of such expenses, and
            (B) the amount of any scholarship, allowance, or payment 
        described in section 25A(g)(2).

    For purposes of the preceding sentence, the term ``eligible 
    educational institution'' has the same meaning given such term by 
    section 25A(f)(2), except that such term shall also include an 
    institution conducting an internship or residency program leading to 
    a degree or certificate awarded by an institution of higher 
    education, a hospital, or a health care facility which offers 
    postgraduate training.

                        (3) Eligible student

        The term ``eligible student'' has the meaning given such term by 
    section 25A(b)(3).

                            (4) Dependent

        The term ``dependent'' has the meaning given such term by 
    section 152.

(f) Special rules

                    (1) Denial of double benefit

        No deduction shall be allowed under this section for any amount 
    for which a deduction is allowable under any other provision of this 
    chapter.

             (2) Married couples must file joint return

        If the taxpayer is married at the close of the taxable year, the 
    deduction shall be allowed under subsection (a) only if the taxpayer 
    and the taxpayer's spouse file a joint return for the taxable year.

                         (3) Marital status

        Marital status shall be determined in accordance with section 
    7703.

(g) Inflation adjustments

                           (1) In general

        In the case of a taxable year beginning after 2002, the $40,000 
    and $60,000 amounts in subsection (b)(2) shall each be increased by 
    an amount equal to--
            (A) such dollar amount, multiplied by
            (B) the cost-of-living adjustment determined under section 
        1(f)(3) for the calendar year in which the taxable year begins, 
        determined by substituting ``calendar year 2001'' for ``calendar 
        year 1992'' in subparagraph (B) thereof.

                            (2) Rounding

        If any amount as adjusted under paragraph (1) is not a multiple 
    of $5,000, such amount shall be rounded to the next lowest multiple 
    of $5,000.

(Added Pub. L. 105-34, title II, Sec. 202(a), Aug. 5, 1997, 111 Stat. 
806; amended Pub. L. 105-206, title VI, Sec. 6004(b), July 22, 1998, 112 
Stat. 792; Pub. L. 105-277, div. J, title IV, Sec. 4003(a)(2)(A), (3), 
Oct. 21, 1998, 112 Stat. 2681-908.)

                       References in Text

    The date of the enactment of this section and the date of the 
enactment of this Act, referred to in subsecs. (d) and (e)(2), probably 
mean the date of enactment of Pub. L. 105-34, which enacted this section 
and was approved Aug. 5, 1997.


                            Prior Provisions

    A prior section 221 was renumbered section 222 of this title.
    Another prior section 221, added Pub. L. 97-34, title I, 
Sec. 103(a), Aug. 13, 1981, 95 Stat. 187; amended Pub. L. 97-448, title 
III, Sec. 305(d)(4), Jan. 12, 1983, 96 Stat. 2400, related to deduction 
for two-earner married couples, prior to repeal by Pub. L. 99-514, title 
I, Sec. 131(a), Oct. 22, 1986, 100 Stat. 2113, applicable to taxable 
years beginning after Dec. 31, 1986.


                               Amendments

    1998--Subsec. (b)(2)(C). Pub. L. 105-277, Sec. 4003(a)(2)(A)(iii), 
struck out concluding provisions which read as follows: ``For purposes 
of sections 86, 135, 137, 219, and 469, adjusted gross income shall be 
determined without regard to the deduction allowed under this section.''
    Subsec. (b)(2)(C)(i). Pub. L. 105-277, Sec. 4003(a)(2)(A)(i), struck 
out ``135, 137,'' after ``sections''.
    Subsec. (b)(2)(C)(ii). Pub. L. 105-277, Sec. 4003(a)(2)(A)(ii), 
inserted ``135, 137,'' after ``sections 86,''.
    Subsec. (d). Pub. L. 105-206, Sec. 6004(b)(2), inserted at end 
``Such 60 months shall be determined in the manner prescribed by the 
Secretary in the case of multiple loans which are refinanced by, or 
serviced as, a single loan and in the case of loans incurred before the 
date of the enactment of this section.''
    Subsec. (e)(1). Pub. L. 105-277, Sec. 4003(a)(3), inserted before 
period at end ``or to any person by reason of a loan under any qualified 
employer plan (as defined in section 72(p)(4)) or under any contract 
referred to in section 72(p)(5)''.
    Pub. L. 105-206, Sec. 6004(b)(1), inserted ``by the taxpayer 
solely'' after ``incurred'' in introductory provisions.


                    Effective Date of 1998 Amendments

    Amendment by Pub. L. 105-277 effective as if included in the 
provision of the Taxpayer Relief Act of 1997, Pub. L. 105-34, to which 
such amendment relates, see section 4003(l) of Pub. L. 105-277, set out 
as a note under section 86 of this title.
    Amendment by Pub. L. 105-206 effective, except as otherwise 
provided, as if included in the provisions of the Taxpayer Relief Act of 
1997, Pub. L. 105-34, to which such amendment relates, see section 6024 
of Pub. L. 105-206, set out as a note under section 1 of this title.


                             Effective Date

    Section applicable to any qualified education loan (as defined in 
subsec. (e)(1) of this section) incurred on, before, or after Aug. 5, 
1997, but only with respect to any loan interest payment due and paid 
after Dec. 31, 1997, and to the portion of the 60-month period referred 
to in subsec. (d) of this section after Dec. 31, 1997, see section 
202(e) of Pub. L. 105-34, set out as an Effective Date of 1997 Amendment 
note under section 62 of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 62, 86, 135, 137, 163, 219, 
469, 6050S of this title.
