Recent Legislative News

President Trump signed the Setting Every Community Up for Retirement (SECURE) Act

President Trump signed the Setting Every Community Up for Retirement (SECURE) Act on December 20, 2019, which makes several changes affecting 529 plans.1) Qualified higher education expenses (QHEE) includes costs of apprenticeship programs.2) Qualified higher education expenses (QHEE) includes student loan payments, with an aggregate lifetime limit of $10,000 in qualified student loan repayments per 529 plan beneficiary and $10,000 per each of the beneficiary's siblings.Also under the SECURE Act, the 2018 changes to the Kiddie Tax have been repealed. A child’s tax rates on unearned income from taxable scholarships and dividends and capital gains from custodial accounts are reverted to the rates that were in effect before 2018.

Proposed GOP tax bill includes provisions affecting education savings

The Tax Cuts and Jobs Act bill introduced by House Republicans on November 2nd includes a few provisions that could directly affect college savers. The bill proposes to eliminate Coverdell Education Savings Accounts (ESAs) and end all contributions to these accounts after 2017. The provision allows for tax-free rollovers of existing Coverdell ESAs into 529 plans. Another provision expands the list of qualified expenses allowed for 529 plans to include $10,000 per year of private elementary or high school expenses, as well as costs of apprenticeship programs.

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H.R. 529 (115th Congress) would improve 529 plans

H.R. 529 was introduced in Congress by Reps. Lynn Jenkins (R-KS) and Ron Kind (D-WI). These are the same representatives that introduced H.R. 529 of the 114th Congress, which was eventually rolled into and passed via the Protecting Americans from Tax Hikes Act in 2015. H.R. 529 offers the following improvements to 529 plans:

  1. Provide businesses with tax incentives to offer 529 plans, including ABLE accounts, to their employees by creating, "Qualified Payroll Deduction Contribution Programs," allowing:
    1. Employees to exclude up to $100 in contributions to the accounts annually, adjusted annually after 2017 for cost-of-living
    2. Expansion of the tax deduction to small employers for setting up retirement plans to include payroll deduction programs to fund 529 plans, up to $1,000
  2. Remove the twice-per-year annual reallocation restriction on 529 accounts, including ABLE accounts
  3. Would allow rollovers between 529 and ABLE accounts for the same beneficiary
  4. Allow withdrawals used to pay qualified student loans (within 90-days of withdrawal) to be excluded from the additional penalty tax
  5. Allow withdrawals to be donated to charity (subject to restrictions) to be excluded from the additional penalty tax

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