Assembly Bill 594 proposes the creation of a new individual income tax subtraction for payments made on qualified education loans. Specifically, it allows taxpayers to deduct up to $5,130 for principal or interest paid on these loans, provided that the payments have not been withdrawn from a college savings account or already deducted from the claimant's gross income. The bill stipulates that this deduction will be available for taxable years beginning after December 31, 2025, and includes a provision for annual adjustments based on inflation, using the U.S. consumer price index.

Additionally, the bill specifies that no deductions will be permitted for amounts withdrawn from college savings accounts or for any interest payments that have already been deducted under federal law. This legislation aims to provide financial relief to individuals repaying education loans, enhancing the existing federal and state tax benefits related to education financing. The Department of Revenue is tasked with implementing the necessary adjustments to tax forms and instructions to accommodate these changes.