National Education Savings Trust Act of 1987

National Education Savings Trust Act of 1987 - Title I: Establishment of National Education Savings Trust - Establishes the National Education Savings Trust.

Creates a Board of Trustees including the Secretaries of Education and of the Treasury, ex officio, and representatives of postsecondary education institutions and of the general public, to be appointed by the President with the advice and consent of the Senate.

Creates under the jurisdiction and control of the Board an Advance Tuition Payment Fund.

Sets forth the general duties of the Board, including paying money directly to postsecondary institutions.

Directs the Secretary of the Treasury, as Managing Trustee, to invest portions of Fund moneys in interest-bearing obligations of the United States or in federally-guaranteed obligations.

Sets forth restrictions on uses of the Fund.

Requires the Board to make annual reports to the Congress.

Allows a purchaser to enter into an agreement with the Trust for the purchase of an advance tuition payment plan for use by a qualified beneficiary to pay a portion of the tuition and fees required to attend a postsecondary education institution.

Sets forth required contents and design of advance tuition payment plan agreements. Directs the Trust to provide that a purchaser may purchase an advance payment tuition plan for an eligible beneficiary at any time following the beneficiary's birth.

Sets forth certain restrictions and conditions for termination of agreements and for refunds upon termination.

Amends the Higher Education Act of 1965 to provide that not more than 75 percent of any corpus or income under any advance tuition payment agreement from the Trust with respect to which the student is a qualified beneficiary shall be considered as income or resources with respect to any student in determining eligibility for assistance under any program funded under title IV of such Act.

Provides that nothing in this Act shall be construed to permit a postsecondary education institution to request information concerning an advance tuition payment plan agreement with the Trust unless such information relates to eligibility for Federal financial assistance under title IV of the Higher Education Act of 1965 or some other Federal law. Provides that nothing in this Act shall be construed to permit any postsecondary education institution to charge any differential in the cost of attendance at such institution for qualified beneficiaries of such a plan agreement.

Authorizes appropriations for a period not to exceed seven fiscal years after the date of enactment of this Act. Directs the Board to notify the Congress whenever, prior to the end of such period, it determines that the Trust is self-supporting.

Title II: Tax Treatment of Advance Tuition Payment Plan Agreements - Amends the Internal Revenue Code to allow a tax deduction in an amount equal to the applicable percentage of the amount paid in cash by the taxpayer to the Trust under any advance tuition payment plan agreement.

Makes the applicable percentage: (1) 100 percent if the adjusted gross income of the taxpayer is not over $25,000; (2) 50 percent if between $25,000 and $60,000; (3) 25 percent if between $60,000 and $100,000; and (4) zero percent if over $100,000. Reduces such dollar amounts by 50 percent in the case of a married individual filing a separate return. Provides for a cost-of-living adjustment for years after 1988.

Allows such deduction only if: (1) the taxpayer is the qualified beneficiary under the agreement and is not the dependent of another taxpayer; or (2) the taxpayer is entitled to a specified deduction with respect to the qualified beneficiary under such agreement for the taxable year.

Limits maximum deductible payments per beneficiary to $2,000 for any taxable year and $48,000 for all taxable years.

Disallows such deduction for the taxable year in which the beneficiary dies or attains age 30 or for any year thereafter. Disallows such deduction to a taxpayer who is a dependent of another taxpayer. Disallows such deduction with respect to a beneficiary who is the taxpayer's spouse, unless the taxpayer is entitled to an exemption for the spouse and files a joint return.

Deems payments to an advance tuition payment plan agreement as made for the preceding taxable year if they are made not later than the time prescribed by law for filing the return.

Provides that the deduction for payments under advance tuition payment plan agreements is also allowable to taxpayers who do not itemize deductions.

Excludes from gross income any amount paid from the Trust to any postsecondary education institution pursuant to any advance tuition payment plan agreement. Includes in the gross income of the person to whom the amount is paid any other amount paid for the Trust which is not described in the preceding sentence. Adds a penalty tax for such refunds from the Trust, except where the beneficiary under the agreement dies (the penalty is equal to 20 percent of gross income, or ten percent of gross income for taxable years ending before the qualified beneficiary attains age 25).