S 580 — Allows gross income tax deduction for certain student loan interest.

S580 SCS SENATE COMMITTEE SUBSTITUTE FOR SENATE, No.

580 STATE OF NEW JERSEY 222nd LEGISLATURE   PRE-FILEDADOPTED FORMAY INTRODUCTION18, IN THE 2026 SESSION     Sponsored by:

SenatorSenator  JAMES BEACH District 6 (Burlington and Camden) Senator  ROBERT W.

SINGER District 30 (Monmouth and Ocean)    Co-Sponsored  by:   SYNOPSIS      Allows gross income tax deduction for certain student loan interest.

Senator Amato   CURRENT  VERSION  OF  TEXTSYNOPSIS      IntroducedAllows Pendinggross Technicalincome Reviewtax bydeduction Legislativefor Counsel.certain student loan interest.

    AnCURRENT ActVERSION allowingOF aTEXT gross     incomeSubstitute taxas deductionadopted forby certain interest paid on student loans, supplementing Title 54A of the NewSenate JerseyHigher Statutes.Education Committee.

       An Act allowing a gross income tax deduction for interest paid on certain student loans and supplementing chapter 3 of Title 54A of the New Jersey Statutes.

       1. 1.    a.  A taxpayer with gross income of $85,000 or less shall be allowed a deduction, not to deductexceed $2,500, from the taxpayer’s gross income for the taxable year pursuantin to the “Newamount Jerseyof Grossinterest Incomepayments Taxpaid Act,”on N.J.S.54A:1-1a etqualified seq.,education anloan, amountother equalthan tointerest thatpaid deductionon toa whichstudent loan under the taxpayerNew isJersey allowed,College ifLoans any,to underAssist sectionState 221Students ofProgram thefor federalwhich Internala Revenuededuction Codeis allowed pursuant to section 4 of 1986P.L.2021, (26c.128 U.S.C.(C.54A:3-13).

s.221),     forb.  interestAs paidused in this section, “qualified education loan” means any indebtedness incurred by the taxpayer duringsolely theto taxablepay yearhigher education expenses which are incurred on behalf of the taxpayer, the taxpayer’s spouse, or any qualifieddependent educationof loanthe astaxpayer thereinat defined.the time the indebtedness occurred.

       2. 2.    This act shall take effect immediately and shall apply to taxable years beginning on or after the January 1 next following the date of enactment.

    STATEMENT        This bill provides a tax deduction for taxpayers who make student loan payments.  A taxpayer may deduct from gross income, the same amount as the federal income tax deduction, if any, that the taxpayer is permitted under section 221 of the Internal Revenue Code for interest paid on education loans.  The federal provision establishes a maximum allowable deduction, currently set at $2,500, and a formula, subject to adjustments for inflation, by which the allowable deduction is reduced as the modified adjust gross income of the taxpayer exceeds $70,000, or $140,000 for joint returns.  The deduction is eliminated entirely for taxpayers whose modified adjusted gross income is $85,000 or more, or $170,000 for joint returns.  As defined in section 221, the interest paid on indebtedness incurred solely to pay qualified higher education expenses at eligible educational institutions can be deducted subject to the conditions outlined in the section.  In addition, married taxpayers must file jointly in order to claim the deduction.

     Because this bill links the calculation of any State gross income tax deduction for student loan interest paid to the corresponding provision in the Internal Revenue Code, any change in the federal provision will automatically affect the State.  A benefit of this linkage is that New Jersey taxpayers can determine the availability and amount of both State and federal student loan interest deductions at the same time.