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Bush FY 2009 budget proposals similar to 2008
(February 4, 2008) - The Administration's Fiscal Year 2009 Budget includes, once again, a proposal that would create the Lifetime Savings Account (LSA) which, like last year's proposal would cap annual contributions at $2,000 per individual. The proposed LSA could be tapped at any time and for any purpose with earnings excluded from federal income tax.
Also carried over from last year: any balance in an existing Coverdell ESA at December 31, 2007, and up to $50,000 in a 529 plan at December 31, 2007, could be transferred tax-free into the account beneficiary's LSA. The transfer deadline would be December 31, 2009. In addition, up to $2,000 (plus earnings) in contributions made to an ESA or 529 plan during 2008 could be transferred to the beneficiary's LSA.
The budget also contains a carryover idea to encourage lower-income families to save for college with 529 plans. The Saver's Credit that currently exists for contributions to certain retirement accounts and IRAs would be extended to eligible contributions to a 529 plan. The tax credit can be worth as much as $1,000 on a maximum $2,000 eligible contribution.
To view the FY 2009 revenue proposals (the Blue Book), click HERE. The LSA proposal is described beginning on page 9, while the Saver's Credit proposal is described beginning on page 39.