So let's do some numbers.
Obama proposes that withdrawals from 529 plans be taxed at LTCG rates. Nothing else changes. Money is not taxed before it goes in & earns tax free as before.
Let's use 2014 rates.
Couples filing jointly with taxable income less that $73,800 AGI pay 0%. That's approx. 75% of filers. Couples with incomes up to $457K AGI pay 15% on the portion above $73,800.
Let's say it goes in effect for 2015 & you spend $10K out of the account you've had since program inception in 1996. $4K is deductible. Your taxes go up a maximum of $900, 15% of $6K.
If you really want to save money, your kids will pick up their first 2 years of core classes at a free community college. Credits are fully transferrable across state colleges. You save several $K/yr. for 2 yrs. up front.
Total out of pocket for a 4 yr. degree can easily be less for most families. Actual cost increases for affluent families are minimal, grading upward for more expensive schools. It's still the best tax deal available for anybody who isn't a hedge fund manager.
Reduce taxable income with tax free contributions. Earn tax free. Take a $4K tax deduction when you pull money out. (or a $2500 tax credit, depending) Pay 15% or less in LTCG taxes when you do. Take advantage of free Community College. Take advantage of whatever other tax breaks the new package offers which may be substantial.
The bottom line for most families may well be better even if the calculations getting there are different.
Perspective-
http://www.businessweek.com/article...savings-accounts-is-less-scary-than-it-sounds
Obama proposes that withdrawals from 529 plans be taxed at LTCG rates. Nothing else changes. Money is not taxed before it goes in & earns tax free as before.
Let's use 2014 rates.
Couples filing jointly with taxable income less that $73,800 AGI pay 0%. That's approx. 75% of filers. Couples with incomes up to $457K AGI pay 15% on the portion above $73,800.
Let's say it goes in effect for 2015 & you spend $10K out of the account you've had since program inception in 1996. $4K is deductible. Your taxes go up a maximum of $900, 15% of $6K.
If you really want to save money, your kids will pick up their first 2 years of core classes at a free community college. Credits are fully transferrable across state colleges. You save several $K/yr. for 2 yrs. up front.
Total out of pocket for a 4 yr. degree can easily be less for most families. Actual cost increases for affluent families are minimal, grading upward for more expensive schools. It's still the best tax deal available for anybody who isn't a hedge fund manager.
Reduce taxable income with tax free contributions. Earn tax free. Take a $4K tax deduction when you pull money out. (or a $2500 tax credit, depending) Pay 15% or less in LTCG taxes when you do. Take advantage of free Community College. Take advantage of whatever other tax breaks the new package offers which may be substantial.
The bottom line for most families may well be better even if the calculations getting there are different.
Perspective-
http://www.businessweek.com/article...savings-accounts-is-less-scary-than-it-sounds