An Act to create 71.05 (6) (b) 57. of the statutes; Relating to: an income tax subtraction for payments on education loans. (FE)
Summary
AB594 would create a new Wisconsin individual income tax subtraction for amounts paid during the taxable year as principal or interest on a taxpayer’s qualified education loan. The subtraction would begin for tax years starting after December 31, 2025, and would be capped at $5,130 for tax year 2026, with the cap indexed annually for inflation beginning in 2027. The bill applies only to the taxpayer’s own qualified education loans and excludes amounts that were paid using funds withdrawn from a college savings account or amounts already deducted for federal income tax purposes.
The bill is structured as a state tax benefit layered on top of existing federal law. Under current federal rules, taxpayers may already deduct up to $2,500 of student loan interest, subject to income limits; AB594 would add a separate Wisconsin subtraction, potentially benefiting borrowers even where the federal deduction is unavailable or limited, so long as the same payment is not double-counted. The Department of Revenue would be required to update the subtraction amount annually and reflect the changes in tax forms and instructions.
Impact
AB594 would amend Wisconsin Statutes section 71.05 by creating a new state income tax subtraction for education loan payments, reducing taxable income for eligible filers beginning in 2026. The measure would affect individual income taxpayers with qualified education debt and would require the Department of Revenue to administer an inflation-adjusted cap and incorporate the change into tax administration. Because it creates a tax exemption/subtraction, it also implicates state tax expenditure review processes and would likely have a revenue impact on the state treasury.
Sentiment
No committee transcripts or recorded votes were provided, so there is no direct evidence of debate or floor sentiment in the materials supplied. Based on the bill’s sponsorship and subject matter, the measure appears to have been introduced as a borrower-relief and affordability proposal aimed at easing the cost of higher education debt. The final status indicates the bill failed to pass pursuant to Senate Joint Resolution 1, suggesting it did not advance to enactment despite introduction and referral.
Contention
The main policy questions likely concern the fiscal cost of the subtraction, whether the benefit should be targeted to borrowers with the greatest need, and how it interacts with existing federal student loan interest deductions. Another likely point of contention is the size of the cap and whether indexing it to inflation is appropriate. Because the bill excludes amounts paid from college savings accounts and prevents double deductions, disputes may also arise over administrative complexity and whether the tax benefit would meaningfully help borrowers with education debt versus primarily aiding higher-income taxpayers who owe state income tax.