reduced to zero by reason of section 25A(d)(1), 
$5,000. 
‘‘(2) LIMITATION
FOR
SECOND
YEARS
OF 
POSTSECONDARY EDUCATION.—For any taxable year 
if an eligible student has completed (before the be-
ginning of such taxable year) the first 2 years of 
postsecondary education at an eligible educational 
institution, the amount of qualified tuition and re-
lated expenses which may be taken into account 
under subsection (a) shall not exceed—
‘‘(A) except as provided in subparagraph 
(B) or (C), $10,000, 
‘‘(B) in the case of a taxpayer with respect 
to which a credit under section 25A(a)(1) would 
be reduced to zero by reason of section 
25A(d)(1), $5,000, and 
‘‘(C) in the case of taxpayer with respect 
to whom the credit under section 25A(a)(2) is 
allowed for such taxable year, zero. 
‘‘(3) DEDUCTION ALLOWED ONLY FOR 4 TAX-
ABLE YEARS FOR EACH ELIGIBLE STUDENT.—A de-
duction may not be allowed under subsection (a) 
with respect to the qualified tuition and related ex-
penses of an eligible student for any taxable year if 
such a deduction was allowable with respect to such
expenses for such student for any 4 prior taxable 
years. 
‘‘(4) ELIGIBLE
STUDENT.—For purposes of 
this section, the term ‘eligible student’ has the 
meaning given such term by section 25A(b)(3).’’. 
(b) REPEAL OF TERMINATION.—Section 222 of such 
Code is amended by striking subsection (e). 
(c) DETERMINATION OF ADJUSTED GROSS INCOME 
WITH RESPECT TO OTHER BENEFITS.— 
(1) Section 21(a)(2) of such Code is amended 
by inserting ‘‘(determined without regard to section 
222)’’ after ‘‘adjusted gross income’’. 
(2) Section 22(d) of such Code is amended— 
(A) by inserting ‘‘(determined without re-
gard to section 222)’’ after ‘‘adjusted gross in-
come’’ the first place it appears, and 
(B) by inserting ‘‘(as so determined)’’ after 
‘‘adjusted gross income’’ the second place it ap-
pears. 
(3) Section 23(b)(2)(B) of such Code is amend-
ed by inserting ‘‘222,’’ before ‘‘911’’. 
(4) Section 24(b)(1) of such Code is amended 
by inserting ‘‘222,’’ before ‘‘911’’. 
(5) Section 151(d)(3) of such Code is amend-
ed—
(A) by inserting ‘‘(determined without re-
gard to section 222)’’ after ‘‘adjusted gross in-
come’’ in subparagraph (A), and 
(B) by inserting ‘‘(as so determined)’’ after 
‘‘adjusted gross income’’ in subparagraph (B). 
(6) Section 165(h)(2)(A)(ii) of such Code is 
amended by inserting ‘‘(determined without regard 
to section 222)’’ after ‘‘adjusted gross income’’. 
(7) Section 213(a) of such Code is amended by 
inserting ‘‘(determined without regard to section 
222)’’ after ‘‘adjusted gross income’’. 
(8) Section 1400C(b)(2) of such Code is 
amended by inserting ‘‘222,’’ before ‘‘911’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to expenses paid after December 
31, 2004 (in taxable years ending after such date), for 
education furnished in academic periods beginning after 
such date. 
SEC. 3. EDUCATION TAX CREDIT FAIRNESS. 
(a) INCREASE IN AGI LIMITS.—
(1) IN
GENERAL.—Subsection (d) of section 
25A of the Internal Revenue Code of 1986 is 
amended to read as follows: 
‘‘(d) LIMITATION BASED ON MODIFIED ADJUSTED 
GROSS INCOME.—
‘‘(1) HOPE CREDIT.—
‘‘(A) IN
GENERAL.—The amount which 
would (but for this subsection) be taken into ac-
count under subsection (a)(1) shall be reduced 
(but not below zero) by the amount determined 
under subparagraph (B). 
‘‘(B) 
AMOUNT
OF
REDUCTION.—The 
amount determined under this subparagraph 
equals the amount which bears the same ratio 
to the amount which would be so taken into ac-
count as—
‘‘(i) the excess of—
‘‘(I) the taxpayer’s modified ad-
justed gross income for such taxable 
year, over 
‘‘(II) $50,000 ($100,000 in the 
case of a joint return), bears to 
‘‘(ii) $10,000 ($20,000 in the case of 
a joint return). 
‘‘(2) LIFETIME LEARNING CREDIT.—
‘‘(A) IN
GENERAL.—The amount which 
would (but for this subsection) be taken into ac-
count under subsection (a)(2) shall be reduced 
(but not below zero) by the amount determined 
under subparagraph (B).