An Act Establishing A Personal Income Tax Deduction For Student Loan Interest.
The introduction of this bill is poised to impact state taxation laws significantly by integrating a new deduction that aligns with existing federal guidelines. If passed, taxpayers in Connecticut who are responsible for student loan interest would benefit from reduced taxable income, thereby potentially lowering their overall tax burden. This could encourage more individuals to pursue higher education, as it directly addresses the financial challenges posed by student loans.
House Bill 5121 proposes a personal income tax deduction for interest paid on qualified student loans. This legislation aims to provide financial relief to taxpayers who are burdened with student loan debt. The bill specifies eligibility criteria, including that the taxpayer must not be married filing separately and must be legally obligated to pay interest on a qualified student loan. The maximum deduction is capped at $2,500 per taxpayer, with adjustments based on the taxpayer's modified adjusted gross income as per federal law standards.
Potential points of contention regarding HB 5121 may arise from the bill's limitations on eligibility and the maximum deduction amount. Critics might argue that capping the deduction at $2,500 could leave many taxpayers still struggling with high student loan debt without adequate relief. Furthermore, discussions may center around how the bill could influence state revenue, as deductions generally reduce the total tax income for the state. Supporters of the bill, however, may contend that the reduction in tax burden could stimulate economic activity by allowing individuals to have more disposable income.