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President Obama proposes reduction in 529 tax benefits

(January 20, 2015) - In a proposal calling for tax reform in order to better assist middle class families, President Obama has suggested no longer allowing earnings from a 529 plan to be withdrawn tax-free. If the proposal becomes law, it will still allow earnings on new 529 plan contributions to grow tax-deferred, but will treat any withdrawals from the plan as ordinary income. The changes would also apply to prepaid tuition plans.

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