529 Plans May Soon Get a Big Benefits Upgrade
Most of us are well aware that college is wildly expensive.
In fact, annual tuition and fees at private institutions rose to an average of $31,231 for the 2014 to 2015 school year.
And that number doesn’t even account for other important “extras,” like laptops—which college savings plans typically don’t cover.
Well, not yet, anyway.
Last week, the House of Representatives passed a bill that would expand the benefits of 529 plans to cover computer equipment, software and services like internet access. The only stipulation is that the technology must be used for educational purposes at an eligible institution.
It turns out, these expanded benefits aren’t actually so new—back in 2009 and 2010, 529 plans covered these expenses, under a temporary provision that has since expired.
At this point, 529 plans only cover technology that is “required for enrollment or attendance.” And, according to Mary Morris, chair of the College Savings Foundation, computers and internet access often don’t count as mandatory expenditures, unless the student is working toward an engineering or technology-related degree.
Another benefit outlined in the proposal? The account holder may reinvest money tax-free in a 529 within 60 days if that sum is refunded from a college or university, due to the student leaving school for a certain time period. Right now, someone in that situation would get hit with income tax as well as a potential 10% penalty.
This bill comes just a month after Obama provoked widespread outrage when he proposed limiting the tax advantages of 529 plans.
This new measure, however, received support from Democrats and Republicans alike and could pass in the Senate, too, as the same bill was recently proposed there. The bill is likely to get Obama’s approval as well, according to White House press secretary Josh Earnest.
If this news has inspired you to start socking away for your own education or your kid’s, start by getting familiar with the basics of 529 plans.