To amend the Internal Revenue Code of 1986 to allow a deduction for the payment of tuition and related expenses for postsecondary education.

Summary: Amends the Internal Revenue Code to allow as a deduction (subject to limitations) an amount equal to the qualified tuition and related expenses of an eligible postsecondary student paid by the taxpayer during the taxable year.

SECTION 1. DEDUCTION FOR TUITION AND RELATED EXPENSES FOR POSTSECONDARY 
              EDUCATION.

    (a) Deduction Allowed.--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 222 as 
section 223 and by inserting after section 221 the following new 
section:

``SEC. 222. TUITION AND RELATED EXPENSES FOR POSTSECONDARY EDUCATION.

    ``(a) Allowance of Deduction.--In the case of an individual, there 
shall be allowed as a deduction an amount equal to the qualified 
tuition and related expenses of an eligible student paid by the 
taxpayer during the taxable year.
    ``(b) Dollar Limitations.--
            ``(1) Per student.--The aggregate payments during the 
        taxable year for the qualified tuition and related expenses of 
        each individual which may be taken into account under 
        subsection (a) shall not exceed $10,000.
            ``(2) Per taxpayer.--The amount allowed as a deduction 
        under subsection (a) for the taxable year shall not exceed 
        $20,000.
            ``(3) Phaseout of deduction.--
                    ``(A) In general.--The amount which would (but for 
                this subsection) be taken into account under subsection 
                (a) shall be reduced (but not below zero) by the amount 
                determined under subparagraph (B).
                    ``(B) Amount of reduction.--The amount determined 
                under this subparagraph is the amount which bears the 
                same ratio to the amount which would be so taken into 
                account as--
                            ``(i) the excess of--
                                    ``(I) the taxpayer's modified 
                                adjusted gross income for such taxable 
                                year, over
                                    ``(II) $125,000 ($175,000 in the 
                                case of a joint return), bears to
                            ``(ii) $20,000.
                    ``(B) Modified adjusted gross income.--The term 
                `modified adjusted gross income' means adjusted gross 
                income determined--
                            ``(i) without regard to this section and 
                        sections 911, 931, and 933, and
                            ``(ii) after application of sections 86, 
                        135, 137, 219, 221, and 469.
    ``(c) Definitions.--For purposes of this section:
            ``(1) Eligible student.--The term `eligible student' has 
        the meaning given to such term by section 25A(b)(3).
            ``(2) Qualified tuition and related expenses.--The term 
        `qualified tuition and related expenses' has the meaning given 
        to such term by section 25A(f)(1), reduced by the sum of--
                    ``(A) the amount excluded from gross income under 
                section 127, 135, or 530 by reason of such expenses, 
                and
                    ``(B) the amount of any scholarship, allowance, or 
                payment described in section 25A(g)(2).
    ``(d) Special Rules.--
            ``(1) Eligible courses.--Amounts paid for qualified tuition 
        and related expenses of any individual shall be taken into 
        account under subsection (a) only to the extent such expenses 
        are attributable to courses of instruction for which credit is 
        allowed toward a degree by an institution of higher education 
        or toward a certificate of required course work at a vocational 
        school.
            ``(2) Taxpayer who is dependent of another taxpayer.--No 
        deduction shall be allowed to a taxpayer under subsection (a) 
        for an amount paid for the education of such taxpayer if such 
        taxpayer is a dependent of another person for a taxable year 
        beginning in the calendar year in which the taxable year of the 
        taxpayer begins.
            ``(3) Spouse.--No deduction shall be allowed under 
        subsection (a) for amounts paid during the taxable year for 
        qualified tuition and related expenses of the spouse of the 
        taxpayer unless--
                    ``(A) the taxpayer is entitled to an exemption for 
                his spouse under section 151(b) for the taxable year, 
                or
                    ``(B) the taxpayer files a joint return with his 
                spouse for the taxable year.''.
    (b) Deduction Allowed in Computing Adjusted Gross Income.--Section 
62(a) of such Code is amended by inserting after paragraph (17) the 
following new paragraph:
            ``(18) Tuition and related expenses for postsecondary 
        education.--The deduction allowed by section 222.''.
    (c) Conforming and Clerical Amendments.--
            (1) Subparagraph (A) of section 86(b)(2) of such Code is 
        amended by inserting ``222,'' after ``221,''.
            (2) Subparagraph (A) of section 135(c)(4) of such Code is 
        amended by inserting ``222,'' after ``221,''.
            (3) Subparagraph (A) of section 137(b)(3) of such Code is 
        amended by inserting ``222,'' after ``221,''.
            (4) Clause (ii) of section 219(g)(3)(A) of such Code is 
        amended by inserting ``222,'' after ``221,''.
            (5) Clause (i) of section 221(b)(2)(C) of such Code is 
        amended by inserting ``222,'' before ``911,''.
            (6) 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. 222. Tuition and related expenses 
                                        for postsecondary education.
                              ``Sec. 223. Cross reference.''.
    (d) Effective Dates.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1998.