Senate Bill 601 proposes the creation of a new individual income tax subtraction for payments made on qualified education loans, specifically targeting principal or interest payments. This deduction is applicable for taxable years beginning after December 31, 2025, and is limited to a maximum of $5,130 for the 2026 tax year. The bill stipulates that this amount will be adjusted annually based on inflation, using the U.S. consumer price index. Additionally, the bill specifies that no deductions will be allowed for amounts withdrawn from college savings accounts or for any interest payments that have already been deducted from the claimant's gross income under federal law.

The bill aims to provide financial relief to individuals repaying education loans by allowing them to reduce their taxable income. It is designed to complement existing federal and state tax provisions, which currently allow for a deduction of up to $2,500 in qualified education loan interest, with a phase-out based on income levels. The introduction of this bill may also lead to a review by the Joint Survey Committee on Tax Exemptions due to its implications on state tax exemptions.