Pulling the education rug out from under conscientious middle-class families

If you are a parent or grandparent using a 529 plan to save for a child’s college expenses, your President proposes to take away the significant value of these plans. Simply put, upon withdrawal of the funds, the earnings would be taxable as they were before 2001.

This Administration prefers to reward through tax credits at the expense of hard working middle and upper middle-class families trying to pay their own way. There is little help available for families in this category and instead of encouraging responsibility, he does the opposite.

One has to wonder why the focus is on “free” education and tax credits for some, but there is no focus on the real problem; the outrageous cost of attending college.

Limit upside-down education savings incentives and consolidate them into a single benefit. The President’s plan would consolidate education savings incentives into one vehicle and redirect the savings into the better targeted AOTC. Specifically, the President’s plan will roll back expanded tax cuts for 529 education savings plans that were enacted in 2001 for new contributions, and – like Chairman Camp’s tax reform plan – repeal tax incentives going forward for the much smaller Coverdell education savings program.

White House fact sheet

From the WSJ 1-22-15

“As he lim­its Coverdell and 529 plans, Mr. Obama is touting a tax credit of up to $2,500 per year for five years, which should pro­vide most of one year at a state uni­ver­sity. He’s also con­tin­uing to pitch low in­ter­est rates and easy for­give­ness for tax­payer-sub­si­dized student loans. And he wants to cut the fed­eral tax on those who have loans for­given. So there’s an added tax in­cen­tive to avoid re­pay­ment to com-ple­ment his tax hike on the suck­ers who try to pay for col­lege them­selves.”

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