Higher Education Funding Act

Higher Education Funding Act - Authorizes an income deduction for contributions to a qualified higher education fund established by the taxpayer for the purposes of funding the higher education of his dependents. Limits the amount of the deduction to the lesser of: (1) $500 times the number of qualified beneficiaries; (2) 10 percent of the taxpayer's adjusted gross income; or (3) $2,500.

Provides that a qualified deduction fund must be established by the taxpayer pursuant to a written plan: (A) solely for the purpose of defraying the cost of room, board, and tuition at an institution of higher education of one or more eligible beneficiaries: (B) which provides that no distribution shall be made by the fund (except upon termination thereof) other than to, or on behalf of, eligible beneficiaries; (C) which provides that upon termination of the fund all assets of the fund shall be distributed to the taxpayer or to his estate; (D) which prohibits contributions to the fund in excess of amounts deductible; and (E) under which the taxpayer consents to the income tax treatment upon termination of the fund.

Defines "institution of higher education" as: (1) an educational institution: (A) which regularly offers education at a level above the twelfth grade; (B) contributions to or for the use of which constitute charitable contributions; (C) which is legally authorized to provide and does provide a program of postsecondary education; and (D) which is accredited by a nationally recognized accrediting agency or association listed by the United States Commissioner of Education; and (2) a business or trade school, or technical institution or other technical or vocational school in any State, which: (A) is legally authorized to provide, and provides within that state, a program of postsecondary vocational or technical education designed to fit individuals for useful employment in recognized occupations; (B) is accredited by a nationally recognized agency or association listed by the United States Commissioner of Education; and (C) has been in existence for two years or has been specially accredited by the Commissioner as an institution meeting the other requirements of this subparagraph. (Amends 26 U.S.C. 218).