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Changes to 529 plans may be coming soon
http://www.savingforcollege.com/articles/changes-to-529-plans-may-be-coming-soon-878

Posted: 2015-12-9

by Kathryn Flynn

Earlier this week, Congressman Kevin Brady (R-Texas), Chairman of the House Ways and Means Committee, filed a bill to extend a variety of recently expired or soon to expire tax provisions. While the Committee is trying to make some of the extensions permanent, this bill requests a two-year extension.

In addition to improvements to the R&D tax credit, provisions to address Real Estate Investment Trusts (REITs) and reforms of the Internal Revenue Service (IRS) the bill also includes the improvements to 529 plans. The extenders could be acted on in the house as early as today.

The language featured in Congressman Brady’s proposal mirrors language from H.R. 529, a bill that passed the House in February, and S. 335, which was added to the Senate Legislative Calendar in May. Proposed improvements to 529 plans include the following:

1. Make computer technology and equipment a permanent qualified expense. Currently, computers are only considered a qualified expense if the school requires them for course attendance and enrollment. If passed, the new law will include computers, Internet access and related technology equipment as qualified expenses permanently.

2. Eliminate distribution aggregation. With the current-federal tax treatment of 529 plan distributions, there is no need for the aggregation required today. In fact, Rep, Lynne Jenkins (R-KS) and Rep. Ron Kind (D-WI) say it creates “an unnecessary paperwork burden for 529 plan administrators”

3. Allow account owners to redeposit funds tax-free. If a student withdraws from school for any reason, distributions from their 529 plan will be considered non-qualified and incur taxes and penalties. The new bill proposes that students who withdraw from school can avoid paying taxes and penalties when the refund is deposited back into the account within 60 days.

Complete details can be found in the Amendment to the Senate Amendment to H.R. 34, offered by Mr. Brady of Texas.

RELATED: Proposed legislation H.R. 529 – Withdrawals, Reporting and Redepositing

Earlier this week, Congressman Kevin Brady (R-Texas), Chairman of the House Ways and Means Committee, filed a bill to extend a variety of recently expired or soon to expire tax provisions. While the Committee is trying to make some of the extensions permanent, this bill requests a two-year extension.

In addition to improvements to the R&D tax credit, provisions to address Real Estate Investment Trusts (REITs) and reforms of the Internal Revenue Service (IRS) the bill also includes the improvements to 529 plans. The extenders could be acted on in the house as early as today.

The language featured in Congressman Brady’s proposal mirrors language from H.R. 529, a bill that passed the House in February, and S. 335, which was added to the Senate Legislative Calendar in May. Proposed improvements to 529 plans include the following:

1. Make computer technology and equipment a permanent qualified expense. Currently, computers are only considered a qualified expense if the school requires them for course attendance and enrollment. If passed, the new law will include computers, Internet access and related technology equipment as qualified expenses permanently.

2. Eliminate distribution aggregation. With the current-federal tax treatment of 529 plan distributions, there is no need for the aggregation required today. In fact, Rep, Lynne Jenkins (R-KS) and Rep. Ron Kind (D-WI) say it creates “an unnecessary paperwork burden for 529 plan administrators”

3. Allow account owners to redeposit funds tax-free. If a student withdraws from school for any reason, distributions from their 529 plan will be considered non-qualified and incur taxes and penalties. The new bill proposes that students who withdraw from school can avoid paying taxes and penalties when the refund is deposited back into the account within 60 days.

Complete details can be found in the Amendment to the Senate Amendment to H.R. 34, offered by Mr. Brady of Texas.

RELATED: Proposed legislation H.R. 529 – Withdrawals, Reporting and Redepositing

 

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