Tax Credits for Interest Paid on Medical Student Loans

Below is something we came up with in MSSNY in conjunction with some state senators to help defray the costs of paying back student loans.  The credit on interest for student loans was designed to relieve some of the burden when we feel it the most, during residency.  Since we pay off the interest of our loans before we start paying back the principal, all payments made early on in residency would be tax-dectible.  The text is below, and feel free to post any comments.


             STATE OF NEW YORK
       ________________________________________________________________________

                                         4914

                              2007-2008 Regular Sessions

                 IN SENATE

                                    April 24, 2007
                                      ___________

       Introduced  by  Sen.  O. JOHNSON  -- read twice and ordered printed, and
         when printed to be committed to the Committee  on  Investigations  and
         Government Operations

       AN  ACT to amend the tax law, in relation to granting resident taxpayers
         the option of claiming a tax credit or deduction from  taxable  income
         for medical student loan interest

         The  People of the State of New York, represented in Senate and Assem-
       bly, do enact as follows:

    1    Section 1. Section 606 of the tax law  is  amended  by  adding  a  new
    2  subsection (u) to read as follows:
    3    (u)  Medical  student  loan  interest  credit. (1) General. A resident
    4  taxpayer shall be allowed the option of claiming a  credit  against  the
    5  tax imposed by this article, or an itemized deduction, to be computed as
    6  provided  in  paragraph  five  of  subsection (d) of section six hundred
    7  fifteen of this article,  for  allowable  medical  school  student  loan
    8  interest expenses.
    9    (2)  Definition.  For  the  purposes of the credit established by this
   10  subsection and the itemized deduction  provided  by  paragraph  five  of
   11  subsection  (d) of section six hundred fifteen of this article, the term
   12  "allowable medical school student loan interest expense" shall mean  the
   13  amount  of  medical  school  student  loan interest expenses paid by the
   14  taxpayer during the taxable year that were  paid  as  a  result  of  the
   15  taxpayer's enrollment and attendance at a medical school accredited by a
   16  nationally  recognized  accrediting  agency  or  other medical education
   17  program which provides a course of study that has been approved  by  the
   18  education  department  to  permit an individual to obtain a license as a
   19  physician. Such term shall not apply to the expenses  of  an  individual
   20  who  is  not a physician as defined under article one hundred thirty-one
   21  of the education law.
   22    (3) Refundability. The credit under this subsection shall  be  allowed
   23  against  the taxes imposed by this article for the taxable year, reduced

        EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                             [ ] is old law to be omitted.
                                                                  LBD10127-02-7

        S. 4914                             2

    1  by the credits permitted by this section. If the credit exceeds the  tax
    2  as so reduced, the taxpayer may receive, and the comptroller, subject to
    3  a  certificate of the commissioner, shall pay as an overpayment, without
    4  interest, the amount of such excess.
    5    (4)  Limitation. No credit shall be allowed under this subsection to a
    6  taxpayer who claims the itemized deduction provided under paragraph five
    7  of subsection (d) of section six hundred fifteen of this article.
    8    § 2. Subsection (d) of section 615 of the tax law is amended by adding
    9  a new paragraph 5 to read as follows:
   10    (5) allowable  medical  school  student  loan  interest  expenses,  as
   11  defined in paragraph two of subsection (u) of section six hundred six of
   12  this  article;  provided,  however,  no deduction shall be allowed under
   13  this paragraph by a  taxpayer  who  claims  the  credit  provided  under
   14  subsection (u) of section six hundred six of this article.
   15    § 3. This act shall take effect immediately and shall apply to taxable
   16  years commencing on or after the first of January of the taxable year in
   17  which this act shall have become a law.