AB 509: Student Loan Assistance
Exclusion would help many Californians receive a tax incentive on student loan repayment plans
By Chris Micheli, March 6, 2023 2:36 pm
Assembly Bill 509 by Assemblyman Vince Fong (R-Bakersfield) was introduced to exclude from personal income certain student loan assistance received by California residents. AB 509 would amend Revenue and Taxation Code Section 17151.
First, AB 509 revises the definition of “educational assistance” in the Personal Income Law that excludes from gross income of an employee amount below $5,250 per calendar year paid by an employer for educational assistance. Specifically, “educational assistance” would include a payment made by an employer on or after January 1, 2024, and before January 1, 2034, paid or incurred by the employer, whether paid to the employee or to a lender, of principal or interest on a qualified education loan (under IRC Section 221) incurred by the employee for education of the employee.
Second, AB 509 would add to the definition of “educational assistance” as not including a payment on a qualified education loan incurred by the employee for education of their spouse or dependent.
Third, AB 509 would make legislative findings and declarations that the goal of this exclusion from personal income is to ensure California addresses the student debt crisis that many people in the state face. Towards this end, this exclusion would help many Californians receive a tax incentive on student loan repayment plans that was provided on behalf of the student by the employer.
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