A bill to amend the Internal Revenue Code of 1986 to permit withdrawals from certain retirement plans for repayment of student loan debt, and for other purposes.
Tax Free Education Act of 2021
This bill permits tax-free distributions of up to $5,250 from 401(k) plans for qualified higher and elementary and secondary education expenses and penalty-free withdrawals from individual retirement accounts (IRAs) for student loan expenses.
The bill also excludes from gross income, for income tax purposes, distributions up to $5,250 from employer-sponsored student loan and tuition payment plans. It repeals the limitation on the deduction of interest on student loans and increases from $15,000 to $25,000 (adjusted for inflation) the maximum contribution amounts for certain tax-preferred retirement plans.
The bill allows employees an election to treat contributions to a 401(k) plan as Roth contributions (thus exempting withdrawals from such plans from tax at retirement).
Finally, the bill allows individual taxpayers a new tax deduction for their qualified higher and elementary and secondary education expenses.
Introduced in Senate
Read twice and referred to the Committee on Finance.
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