A few weeks ago we wrote about the State of the Union address and how Obama had proposed a tax hike on 529 Plans (used for college savings). We were largely opposed to this tax hike, as families putting money into 529 Plans did so after taxes. If you’re being taxed on income before putting it away to save, why be taxed again for withdrawing from an account in which you’re savings for education costs?
Well, during his visit in Indianapolis last week Obama publically stated that this proposal has been killed. He explained that he initially intended to kill 529 Plan’s altogether for some other broad-based loan. He wanted to use the money saved on 529’s to finance the free community college idea; however, “It wasn’t worth it… to eliminate [529’s],” Obama said. “The savings weren’t that great. So we actually, based on response, changed our mind and are going to be paying for the two years of free community college with other sources.”
We couldn’t be happier this happened. Although, we must admit, we still aren’t big fans of 529 Plans—any money saved in the child’s name is assessed higher during the calculation of your Estimated Family Contribution, and this can really kill scholarship and grant opportunities—it is good to know that those with 529’s won’t be penalized after the fact.
Now, if you want to know how we’d recommend saving for college and strategically funding any college costs? Call us 661-295-9946. Just reference this BLOG and we’ll give you a free, one hour, no-strings-attached consultation to give you the tools you need to afford college.