spouse, a credit shall be allowed under this section
for any taxable year with respect to such loan only
if a deduction under section 151 with respect to
such individual is allowed to the taxpayer for such
taxable year.
‘‘(e) PHASEOUT OF BENEFIT.—
‘‘(1) IN
GENERAL.—The amount of interest
which would (but for this subparagraph) be taken
into account under paragraph (a) for the taxable
year shall be reduced (but not below zero) by the
amount which bears the same ratio to such interest
as the excess of the taxpayer’s adjusted gross in-
come for such taxable year over the applicable dollar
amount bears to phaseout range.
‘‘(2) APPLICABLE DOLLAR AMOUNT; PHASEOUT
RANGE.—For purposes of subparagraph (1)—
‘‘(A) in the case of a return of an unmar-
ried individual, the applicable dollar amount is
$40,000 and the phaseout range is $15,000,
‘‘(B) in the case of joint return, the appli-
cable dollar amount is $60,000 and the phase-
out range is $30,000, and
‘‘(C) in the case of a married individual fil-
ing a separate return, the applicable dollar
amount is $30,000 and the phaseout range is
$15,000.
‘‘(f) DEFINITIONS.—For purposes of this section—
‘‘(1) QUALIFIED EDUCATION LOAN.—The term
‘qualified education loan’ means any indebtedness
incurred to pay qualified higher education ex-
penses—
‘‘(A) which are incurred on behalf of the
taxpayer, the taxpayer’s spouse, or a dependent
of the taxpayer,
‘‘(B) which are paid or incurred within a
reasonable period of time before or after the in-
debtedness is incurred, and
‘‘(C) which are attributable to education
furnished during a period during which the re-
cipient was at least a half-time student.
Such term includes indebtedness used to refinance
indebtedness which qualifies as a qualified education
loan. The term ‘qualified education loan’ shall not
include any indebtedness owed to a person who is re-
lated (within the meaning of section 267(b) or
707(b)(1)) to the taxpayer.
‘‘(2) QUALIFIED
HIGHER
EDUCATION
EX-
PENSES.—The term ‘qualified higher education ex-
penses’ means the cost of attendance (as defined in
section 472 of the Higher Education Act of 1965
(20 U.S.C. 1087ll), as in effect on the day before
the date of enactment of this section) of the tax-
payer, the taxpayer’s spouse, or a dependent of the
taxpayer at an eligible educational institution. For
purposes of the preceding sentence, the term ‘eligible
educational institution’ has the same meaning given
such term by section 135(c)(3), except that such
term shall also include an institution conducting an
internship or residency program leading to a degree
or certificate awarded by an institution of higher
education, a hospital, or a health care facility which
offers postgraduate training.
‘‘(3) HALF-TIME
STUDENT.—The term ‘half-
time student’ means any individual who would be a
student as defined in section 151(c)(4) if ‘half-time’
were substituted for ‘full-time’ each place it appears
in such section.
‘‘(4) DEPENDENT.—The term ‘dependent’ has
the meaning given such term by section 152.
‘‘(g) SPECIAL RULES.—
‘‘(1) DENIAL OF DOUBLE BENEFIT.—No credit
shall be allowed under this section for any amount
for which a deduction is allowable under any other
provision of this chapter.
‘‘(2) MARITAL STATUS.—Marital status shall be
determined in accordance with section 7703.’’
(b) OPTIONAL DEDUCTION FOR INTEREST ON EDU-
CATION LOANS.—Paragraph (2) of section 163(h) of the
Internal Revenue Code of 1986 (defining personal inter-
est) is amended by striking ‘‘and’’ at the end of subpara-
graph (D), by redesignating subparagraph (E) as subpara-
graph (F), and by inserting after subparagraph (D) the
following new subparagraph:
‘‘(E) any interest paid on a qualified edu-
cation loan (as defined in section 23(f)) during
the period described in section 23(d) and sub-
ject to the income limitations described in sec-
tion 23(e), unless a credit or deduction is taken
with respect to such interest under any other
provisions of this chapter, and’’.
(c) CLERICAL AMENDMENT.—The table of sections
for such subpart A is amended by inserting after the item
relating to section 22 the following new item:
‘‘Sec. 23. Interest on education loans.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995, but only with respect to loans the
first required payment on which is after such date.
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