529 News

Recent Federal News

President Trump signs Tax Cuts and Jobs Act into law

(December 17, 2017) - The GOP tax reform expands 529 plan benefits to allow qualified withdrawals for K-12 private school expenses. The new law also allows a person living with a disability to rollover a traditional 529 plan to an 529 ABLE account without tax consequences.

New bills announced that would enhance ABLE Act

(March 18, 2016) - A new package of bills intended to strengthen the Achieving a Better Life Experience (ABLE) Act were recently introduced. These include the ABLE to Work Act, which will allow working people with disabilities to save a portion of their income in a 529 ABLE account, the ABLE Financial Planning Act, which will allow rollovers from a 529 college savings account to an 529 ABLE account, and the ABLE Age Adjustment Act, which will raise the age limit for ABLE accounts from 26 to 46.

President Obama signed the Protecting Americans from Tax Hikes (PATH) Act

(December 21, 2015) - President Obama signed the Protecting Americans from Tax Hikes (PATH) Act on December 18, 2015 which makes several changes affecting 529 plans, RETROACTIVE TO THE BEGINNING OF 2015.

1) Qualified higher education expenses (QHEE) includes expenses for the purchase of (1) computers and certain peripheral equipment under the control of the computer (e.g. printers); (2) Internet access and related services; and (3) computer software. Such purchases are only qualified if the items are to be used primarily by the beneficiary during any of the years the beneficiary is enrolled at an eligible education institution. Expenses for computer software that is designed for sports, games, or hobbies is generally excluded, unless the software is predominantly educational in nature.

2) A refund by an eligible educational institution of qualified higher education expenses paid with funds from a 529 plan can be recontributed to a 529 plan for which the student is the beneficiary in order for distributions to avoid inclusion in income. A recontribution must be made no more than 60 days after the date of the refund, and the recontributed amount cannot exceed the amount of the refund. A special transition rule provides that refunds received after December 31, 2014, and before December 18, 2015, may be recontributed not later than 60 days after the date of enactment.

3) Multiple accounts in a 529 program with the same owner and beneficiary no longer must be aggregated for purposes of computing the earnings portion of a distribution. Instead, the earnings portion of a distribution will be computed by each 529 program on an account-by-account basis.

Also under the PATH Act, the American Opportunity Tax Credit, which was scheduled to revert to the old HOPE Scholarship credit at the end of 2017, is now permanent. The above-the-line deduction for qualified tuition and fees is extended through 2016.

A point of confusion concerns Section 529A ABLE accounts. The Joint Committee on Taxation description of the PATH Act refers to a provision that would permit limited rollovers from a 529 account to a 529A account without penalty. However, the rollover change does not appear to be part of the final PATH Act. The law does remove the requirement that ABLE accounts be established only in the state of residence of the ABLE designated beneficiary or a contracting state.

More Federal News

• New FAFSA timing rules may affect 529 plans (09/16/2015)
• House Committee approves HR 529 (02/12/2015)
• President Obama drops proposal to tax withdrawals from 529 plans (01/28/2015)
• HR 529 would provide 529 improvements (01/27/2015)
• President Obama proposes reduction in 529 tax benefits (01/20/2015)
• Twice-yearly investment changes in 529 accounts gets House okay (12/05/2014)
• Inflation adjustment affecting college savers (10/31/2014)
• Student loan interest rates headed upward (05/23/2014)
• Congress to consider bill improving 529 plans (03/31/2014)
• IRS says bonus paid to open a 529 is a 1099 event (03/15/2013)
• Congress votes to keep higher-education tax incentives (01/02/2013)
• House bill would extend 529 use for K-12 expenses (06/21/2012)
• NextGen Select to add Savings Portfolio (02/01/2012)
• Court: Failed 529 rollover triggers tax, no penalty (11/11/2011)
• New tax law extends Coverdell ESA benefits (12/22/2010)
• Court case rules on Sec. 529 room and board (12/01/2009)
• IRS announces 2010 inflation adjustments (10/16/2009)
• Treasury issues report calling for 529 improvements (09/09/2009)
• Senate bill would provide consistent definition of education expenses (06/23/2009)
• White House asks Treasury for 529-plan improvements (04/20/2009)
• House bill would make 529 contributions eligible for saver's credit (03/12/2009)
• Economic stimulus bill adds computer expenses as 529-eligible (02/17/2009)
• Oregon pushes idea for using 529s to pay back student loans (02/03/2009)
• IRS to allow two 529 investment changes in 2009 (12/23/2008)
• Gift-tax annual exclusion to increase to $13,000 (09/17/2008)
• Section 529 regulations still an IRS priority (09/10/2008)
• President Bush signs higher-education reauthorization bill (08/15/2008)
• Military survivor benefits may be contributed to Coverdell ESA (06/18/2008)
• Supreme Court upholds Kentucky tax discrimination (05/19/2008)
• New law eases student-loan pressures (05/08/2008)
• House subcommittee to hold hearing on tax benefits for college (04/25/2008)
• Bush FY 2009 budget proposals similar to 2008 (02/04/2008)
• IRS to propose 529 anti-abuse rules (01/18/2008)
• Higher education bill introduced in the House (11/12/2007)
• IRS: Unchecked box does not spoil 5-year election (10/29/2007)
• IRS announces inflation adjustments for 2008 (10/19/2007)
• President Bush signs student financial aid bill (09/28/2007)
• Congress passes bill that will change financial aid treatment of 529s (09/08/2007)
• IRS lists 529 regulations as 2007-2008 priority (08/13/2007)
• U.S. Senate approves student aid bill affecting 529 treatment (07/20/2007)
• House bill would eliminate aid exemption for student-owned 529s (07/12/2007)
• Upward interest adjustment on some student loans (06/03/2007)
• Congress passes new kiddie tax on college students (05/25/2007)
• Bush FY 2008 budget includes watered-down LSA proposal (02/05/2007)
• 2007 tax inflation adjustments announced (11/10/2006)
• Congress passes 529 tax permanency (08/05/2006)
• Most Senators support 529 tax permanency (03/20/2006)
• New law makes changes to financial aid treatment of 529s (02/09/2006)
• Bush budget would impact 529 plans (02/07/2006)
• 60-day rollover deadline extended for hurricane victims (12/01/2005)
• Federal Tax Reform Panel to propose new family savings accounts (10/20/2005)
• GAO issues report detailing complexity of higher education incentives (08/30/2005)
• IRS keeps 529 regulations on priority list (08/12/2005)
• 529 permanency bill to be introduced in U.S. Senate (05/24/2005)
• 529 tax permanency bill is introduced in Congress (05/17/2005)
• Bush budget advances LSAs and 529 reforms (02/07/2005)
• Tax bill includes AMT relief for college students (09/24/2004)
• Section 529 regs are IRS priority (07/27/2004)
• 529 plans take center stage at Senate hearing (07/22/2004)
• House subcommittee conducts hearing on 529 plans (06/07/2004)
• Lifetime Savings Accounts bill introduced in Congress (03/31/2004)
• SEC seeking investor comments on proposed broker disclosure forms (03/16/2004)
• Bush tax proposals unveiled for fiscal 2005 (02/02/2004)
• Coverdell ESAs now share advantageous financial aid treatment (01/26/2004)
• Military Tax Act eliminates 10% penalty for academy students (11/15/2003)
• Congress recognizes importance of college savings (10/15/2003)
• Final 529 regulations remain a priority in 2003 (07/25/2003)
• Bush signs new tax cuts into law (05/28/2003)
• Technical correction provides a break from penalty (03/09/2002)
• IRS eases restriction investment direction (09/07/2001)
• Congress approves changing name of Education IRAs (07/23/2001)
• Tax Incentives for Education After the 2001 Tax Relief Act (06/07/2001)