U.S. Representative Jeff Denham (R-Turlock) voted in support of H.R. 529, legislation to expand, bolster, and modernizes 529 college saving accounts to offer families increased flexibility when funding educational endeavors.
A 529 is a savings plan operated by a state or educational institution with tax advantages and potentially other incentives to make it easier to save for college and other post-secondary education.
“As the father of two kids, one in college and one preparing for college, I understand how difficult it can be to save up for your children’s future,” said Denham.
Earnings on these plans are not subject to federal tax, and generally not subject to state taxes when used for toward the designated beneficiary’s educational expenses like tuition, fees, books, room and board; contributions to a 529 plan are not tax deductible, however.
Anyone can set up a 529 plan, serving as the fund’s proprietor, at any time and name anyone as a beneficiary; there is not a limit to the number of plans one can set up or income restrictions, though contributions may not exceed the amount needed to cover qualifying educational expenses.
Over the past 10 years, the price of attending a four-year public university has increased by nearly 49 percent.
The bill is geared toward enhancing the widely used plans by updating them though eliminating unnecessary paperwork and administrative costs, allowing students to use the savings to purchase computers for school, and allowing taxpayers to re-deposit refunds from colleges without taxes or penalties.
There are over 12 million 529 College Savings Plan account holders nationwide, including members of many low-income families in the Central Valley.
“Hardworking families are struggling more than ever to keep up with the rising costs of higher education, and this legislation works to address this growing issue by improving existing 529 College Savings Plans and keeping them tax-free,” said Denham. “The efforts of American families to plan ahead and save must be incentivized, not penalized.”
The bill awaits a vote in the Senate before it has potential to be enacted.
