Families Educational Opportunity Act of 1997

Summary: Families Educational Opportunity Act of 1997 - Amends the Internal Revenue Code to allow an individual a deduction for the amount of qualified higher education expenses paid by the individual.  Limits the amount allowed to $10,000.  Provides for a limitation based on modified adjusted gross income.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Families Educational Opportunity Act 
of 1997''.

SEC. 2. DEDUCTION FOR QUALIFIED HIGHER EDUCATION EXPENSES.

    (a) In General.--Part VII of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to additional itemized 
deductions for individuals) is amended by redesignating section 221 as 
section 222 and by inserting after section 220 the following new 
section:

``SEC. 221. QUALIFIED HIGHER EDUCATION EXPENSES.

    ``(a) Allowance of Deduction.--In the case of an individual, there 
shall be allowed as a deduction the amount of qualified higher 
education expenses paid by the taxpayer during the taxable year.
    ``(b) Limitations.--
            ``(1) Dollar limitation.--The amount allowed as a deduction 
        under subsection (a) for any taxable year shall not exceed 
        $10,000.
            ``(2) Limitation based on modified adjusted gross income.--
                    ``(A) In general.--The amount allowed as a 
                deduction under subsection (a) (after application of 
                paragraph (1)) shall be reduced (but not below zero) by 
                $2,000 for each $5,000 (or part thereof) by which the 
                taxpayer's modified adjusted gross income for such 
                taxable year exceeds $40,000 ($60,000 in the case of a 
                joint return).
                    ``(B) Modified adjusted gross income.--For purposes 
                of this paragraph, the term `modified adjusted gross 
                income' means the adjusted gross income of the taxpayer 
                for the taxable year determined--
                            ``(i) without regard to this section and 
                        sections 911, 931, and 933, and
                            ``(ii) after the application of sections 
                        86, 135, 219 and 469.
                For purposes of sections 86, 135, 219, and 469, 
                adjusted gross income shall be determined without 
                regard to the deduction allowed under this section.
                    ``(C) Inflation adjustments.--
                            ``(i) In general.--In the case of a taxable 
                        year beginning after 1998, the $40,000 and 
                        $60,000 amounts described in subparagraph (A) 
                        shall each be increased by an amount equal to--
                                    ``(I) such dollar amount, 
                                multiplied by
                                    ``(II) the cost-of-living 
                                adjustment determined under section 
                                1(f)(3) for the calendar year in which 
                                the taxable year begins, determined by 
                                substituting `calendar year 1997' for 
                                `calendar year 1992' in subparagraph 
                                (B) thereof.
                            ``(ii) Rounding.--If any amount as adjusted 
                        under clause (i) is not a multiple of $1,000, 
                        such amount shall be rounded to the next lowest 
                        multiple of $1,000.
    ``(c) Qualified Higher Education Expenses.--For purposes of this 
section--
            ``(1) In general.--The term `qualified higher education 
        expenses' means tuition and fees charged by an educational 
        institution and required for the enrollment or attendance of--
                    ``(A) the taxpayer,
                    ``(B) the taxpayer's spouse, or
                    ``(C) any child of the taxpayer (within the meaning 
                of section 151(c)(3)), or any individual for whom the 
                taxpayer is the legal guardian,
        as an eligible student at an eligible educational institution 
        (as defined in section 135(c)(3)) on a full-time basis.
            ``(2) Exception for education involving sports, etc.--Such 
        term does not include expenses with respect to any course or 
        other education involving sports, games, or hobbies, unless 
        such expenses are part of a degree program.
    ``(d) Special Rules.--
            ``(1) No double benefit.--
                    ``(A) In general.--No deduction shall be allowed 
                under subsection (a) for qualified higher education 
                expenses with respect to which a deduction is allowable 
                to the taxpayer under any other provision of this 
                chapter unless the taxpayer irrevocably waives his 
                right to the deduction of such expenses under such 
                other provision.
                    ``(B) Dependents.--No deduction shall be allowed 
                under subsection (a) to any individual with respect to 
                whom a deduction under section 151 is allowable to 
                another taxpayer for a taxable year beginning in the 
                calendar year in which such individual's taxable year 
                begins.
                    ``(C) Savings bond exclusion.--A deduction shall be 
                allowed under subsection (a) for qualified higher 
                education expenses only to the extent the amount of 
                such expenses exceeds the amount excludable under 
                section 135 for the taxable year.
            ``(2) Limitation on taxable year of deduction.--A deduction 
        shall be allowed under subsection (a) for any taxable year only 
        to the extent the qualified higher education expenses are in 
        connection with--
                    ``(A) attendance during the taxable year, or
                    ``(B) an academic term beginning during such 
                taxable year or during the 1st 3 months of the next 
                taxable year.''
    (b) Deduction Allowed Without Itemization.--Section 62(a) is 
amended by inserting after paragraph (16) the following new paragraph:
            ``(17) Qualified higher education expenses.--The deduction 
        allowed by section 221.''
    (c) Clerical Amendment.--The table of sections for part VII of 
subchapter B of chapter 1 of such Code is amended by striking the item 
relating to section 221 and inserting:

                              ``Sec. 221. Higher education expenses.
                              ``Sec. 222. Cross reference.''
    (d) Effective Date.--The amendments made by this section shall 
apply to payments made after December 31, 1997.