Free Republic

LOS ANGELES, Jan 22 (Reuters) - President Barack Obama's proposal this week to roll back tax benefits for so-called 529 plans exposes a fundamental disagreement about who is benefiting from these state-sponsored college savings plans. 529 plans are sponsored by states and run by investment management companies. Withdrawals from the accounts can be used tax-free to pay for qualified education expenses at any college or university in the country, such as tuition, fees and books. Supporters of Obama's proposal point to a 2012 government report showing the plans being used by less than 3 percent of all U.S. families and...

President Obama is proposing a radical change to the 529 college savings plans held by millions of families, which would require those who use them to rethink their approach to college savings. As part of his plan to simplify the tax code and help the middle class, one of the 529 plan’s most attractive benefits would be eliminated: Money could no longer be withdrawn tax-free. (The new rules would apply only to new contributions.) The accounts, many of which are run by the states, allow people to make contributions that grow tax-free. The money can be withdrawn without the paying...

The First Family’s 529 Windfall The large contributions the Obamas have already made won’t be taxed. If there’s any silver lining in the President’s plan to end the major tax benefit of saving for college, it’s that at least he’s not talking about taxing money that’s already been saved. This aspect of the Obama plan is particularly valuable to people like, well, Barack Obama. As we noted on Thursday, the President wants to allow the Internal Revenue Service to begin taxing distributions from so-called 529 plans, even if they are used as intended to fund legitimate educational expenses such as...