What's happening
This bill exempts lump sum distributions and certain retirement payments used for post-secondary education loan payments from New York State tax.
Why it matters
Encourages the use of retirement savings to pay off student loans. by removing state tax penalties for using lump sum distributions, pensions, or annuities for this purpose, potentially making it easier for New Yorkers to address student debt without incurring additional tax burdens.
Provides tax relief for all ages. , not just those above typical retirement age, allowing younger individuals with retirement accounts to use their funds for student loan payments without state income tax consequences.
May influence financial planning and retirement security. by creating a new incentive for individuals to use retirement resources for education debt, which could help with immediate debt relief but might impact long-term retirement savings if not carefully managed.
Applies retroactively to tax years starting in 2016. , offering potential refunds or amended returns for those who previously used retirement funds to pay student loans and paid state taxes on those withdrawals.
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Who cares
Headline styles
No Tax on Student Loan Payouts
Plain English, a few words. Used as the page title.
Sponsors
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History
- Enacting clause stricken
- Referred to ways and means
- Referred to ways and means
Companion bill
The same bill in the other chamber. A bill becomes law when one version passes both houses and the governor signs it, so either number can carry it.
Tax Break for Student Loans
In Senate Committee · Investigations And Government Operations · Sponsor David J. Valesky
Full text
2 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
59
2017-2018 Regular Sessions
IN ASSEMBLY (Prefiled)
January 4, 2017
Introduced by M. of A. PAULIN -- read once and referred to the Committee on Ways and Means
AN ACT to amend the tax law, in relation to lump sum distributions used for the payment of post-secondary education loans
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Section 603 of the tax law is amended by adding a new subsection (c) to read as follows:
(c) Exemption. Lump sum distributions, as taxed under this section, used for payments to an institution receiving any scheduled periodic payments from a borrower pursuant to the terms of any post-secondary education loan, and making the payments of principal and interest and other amounts with respect to the amounts received from the borrower as may be required pursuant to the terms of the post-secondary education loan or of the contract governing the servicing; or, during a period when payment on a post-secondary education loan is deferred, maintaining account records for the loan and communicating with the borrower regarding the loan, on behalf of the loan's holder shall not be subject to the separate tax imposed in subsection (a) of this section.
§ 2. Subsection (c) of section 612 of the tax law is amended by adding a new paragraph 3-d to read as follows:
(3-d) Pensions and annuities received by an individual of any age, not otherwise excluded pursuant to paragraph three of this subsection, to the extent includible in gross income for federal tax purposes, which arise (i) from an employer-employee relationship or (ii) from contributions to a retirement plan which are deductible for federal income tax purposes which are used for payments to an institution receiving any scheduled periodic payments from a borrower pursuant to the terms of any post-secondary education loan, and making the payments of principal and interest and other amounts with respect to the amounts received from the
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD06349-01-7
A. 59 2
borrower as may be required pursuant to the terms of the post-secondary education loan or of the contract governing the servicing; or, during a period when payment on a post-secondary education loan is deferred, maintaining account records for the loan and communicating with the borrower regarding the loan, on behalf of the loan's holder. However, the term "pensions and annuities" shall also include distributions of any kind, including any lump sum distributions, as defined in subparagraph (A) of paragraph four of subsection (e) of section four hundred two of the internal revenue code and taxed under section six hundred three of this article, received by an individual of any age from an individual retirement account or an individual retirement annuity, as defined in section four hundred eight of the internal revenue code, and distributions received by an individual of any age from self-employed individual and owner-employee retirement plans which qualify under section four hundred one of the internal revenue code, whether or not the payments are periodic in nature.
§ 3. This act shall take effect immediately and shall apply to taxable years commencing on or after January 1, 2016.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.