Did anyone see the proposal to tax 529 withdrawals?

[charleygop]

agh, next they'll want to tax the prepaid tuition plans.

It is not them. It is him.

 

[staceyeileen]

If this passes, what would make investing in a 529 any different than just investing using a regular brokerage account?

 

[Iowajes]

If this passes, what would make investing in a 529 any different than just investing using a regular brokerage account?

It really wouldn't.

It basically punishes saving for college since it makes it the same as any investment.

 

[luvdisney00]

It's just another way of "redistributing the wealth". Responsible families who sacrifice and save are expected to shoulder some of the burden for those who didn't . Thankfully I don't think it will pass.

 

[jdmccon7]

If you search for 'saving for college' or more directly 'no 529 tax' you can find an article that lays it out well. At the bottom there is a petition to sign to stop this. Agree is doesn't look like it will pass but even the thought of it is so frustrating.

 

[Jeff_G]

If this passes, what would make investing in a 529 any different than just investing using a regular brokerage account?

It would actually make it worse, since there would still be a 10% penalty for using the money for non educational proposes. It will basically kill the 529 plans. Remember this is "Middle Class Economics".

 

[staceyeileen]

We have a prepaid savings plan offered through our state (FL). Would there be any affect on this?

This is one time where I'm glad our government can't actually pass any kind of legislation.

 

[havaneselover]

We have a prepaid savings plan offered through our state (FL). Would there be any affect on this? This is one time where I'm glad our government can't actually pass any kind of legislation.

This won't pass. But if it did, the money in there now would be grandfathered. Gains on new deposits will be taxable.

My plans are through VA. We get a decent tax savings (or free money as some call it) from the state.

 

[Flamingeaux]

This is coming from the man that thinks that investing in infrastructure has a lasting impact on the economy but investing in a pipeline has none.

Shovel-ready - what a tool.

 

[staceyeileen]

This won't pass. But if it did, the money in there now would be grandfathered. Gains on new deposits will be taxable.

My plans are through VA. We get a decent tax savings (or free money as some call it) from the state.

Are you saying that this DOES affect prepaid savings plans?

 

[staceyeileen]

Also, how in the world would they figure out how much tax is owed?

Gains on future contributions would be taxed but not contributions already in the accounts? I hope we don't have to figure that one out.

 

[Iowajes]

Also, how in the world would they figure out how much tax is owed?

Gains on future contributions would be taxed but not contributions already in the accounts? I hope we don't have to figure that one out.

This would be the same as any investment account really. You get a tax form from the investment firm/bank at the end of the year. I assume it would be proportional based on the value of the holding when the tax goes into place if it is taxed as you described above.

 

[havaneselover]

Are you saying that this DOES affect prepaid savings plans?

Mine is prepaid. Well I have both. But yes if that money were invested. Again current money would be grandfathered and it's not going to happen. It's just the suggestion that is so ludicrous.

Btw, in 2007 the obamas put $240k in 529s according to Forbes.

 

[Iowajes]

It's just another way of "redistributing the wealth". Responsible families who sacrifice and save are expected to shoulder some of the burden for those who didn't . Thankfully I don't think it will pass.

I think this is a really unfair way to do it and I hope it doesn't pass, but even if it is funded through general education funds making K-12 into K-14, it would still be wealth distribution that hits the middle class the hardest. Low incomes have very low tax liability, so they won't pay, and the highest incomes tend to be able to avoid high percentage of tax because of how investments are taxed different from earned income. Percentage wise, the middle class still gets screwed.

 

[Marionnette]

People keep saying that they hope that it doesn't pass. Do you actually know how your government works? This was an idea that was throw out there during the State of the Union address. The last time that I checked, the House of Representatives initiates tax bills, not the executive branch.

This is all smoke and mirrors. It pacifies the "tax the rich" faction who believe that anyone who makes more money than they do is "rich", even though one who suggested the tax knows full well that it doesn't stand a snowball's chance of even reaching the House floor.

 

[Iowajes]

When I say "I hope it doesn't pass" I mean that I hope Congress doesn't use this idea.

 

[tvguy]

Congress is always looking for money.

Some of us are old enough to remember the last 1970's and IRA's. I found some of my old paperwork. At first, the things you could take money out without a penalty for was much broader.......buying a house, funding a child's education, buying a car..medical bills....but then Congress decided to add the penalty for early withdrawal because they felt people were abusing the system.

They wanted that money to be more retirement, only.

 

[Shanan]

Haven't read all the replies. I totally disagree with taxing the plans. Once again responsible people are punished while entitlement mentality runs rampart. DH & I live below our means in order to put money in both IRA's and 401Ks. If we had children we would have had 529 plan. I cannot stand how this country keeps moving closer & closer to socialism (entitlement programs). My iPhone which works fine is a 4 & yes I could have upgraded to a 5 then a 6 but why.... I prefer to put that extra money towards house payment etc

 

[Dakota731]

Congress is always looking for money.

This was not initiated by Congress! It was a desperate attempt to polish a very tarnished image and cause more division among the "haves" and "have nots" hoping to build up a base of voters for the next election. Anyone who believes it was meant to help the middle class has the their head buried in the sand.

 

[Disneychick75]

It really wouldn't.

It basically punishes saving for college since it makes it the same as any investment.

Punishing those who are fiscally responsible.