How does screwing with and taxing the 529 education plans I have set up for the grandkids

[Sopkoviak]

Help me in the middle class?

I admit I skipped the speech last night and I understand he probably doesn't have a chance in hell of doing it but WTF?

It's one of the few things Bush did right.

[LondonReign2]

1. Makes no sense to me either

Why target the middle class for a tax increase? Particularly one that targets savings aimed at the spiraling cost of college?

[CreekDog]

5. They aren't. They are targeting the middle class for an expanded tax credit

and cutting back a tax loophole used by the wealthy.

the net effect is only to tax those with incomes over 180k and that would only be on new contributions to 529's, not previous.

[Recursion]

9. Like all capital gains, it mostly goes to the top 10% or so

Pick any capital gain and you'll find a few middle class people who get it, but most 529 users are making six figures. My heart bleeds.

[exboyfil]

2. At this point it really does not impact me

much because I have been in cash the last five years that I have been doing significant contributions to it (obviously a mistake given the market growth but my older daughter is about two years away from finishing college and my younger daughter is about four years away).

The President's proposal is to tax the gains at the beneficiary's tax rate when they are pulled out. The accounts are kind of used as tax dodges currently by wealthy individuals. As far as I can tell the money can grow forever, and we are talking about $14,000 for each child per year. Over 22 years that is $308K going in with growth not ever being taxed. The beneficiary can be changed to another family member which gives a lot of flexibility. Eventually it will either have to be taxed or used for educational benefits.

I guess I would like to see a lifetime limit of four years tuition and room and board at an average state school as one possible change.

The state tax benefit is great. At my income tax bracket it is 9% of the contribution amount. For the last five years I have been maxing out the state benefit for both daughters using my year end bonus. We don't budget the money into our lives. Between scholarships and completing two years of their undergraduate work while in high school, I will be able to fully fund their tuition, room and board, and textbooks. We are a one income couple, but I do have a very good job. I am amazed by the two income couples (some of which each one has more income than me) that complain about paying for college for their children.

[SheilaT]

28. My children have been the beneficiaries of 529 plans set up

by their grandparents. The money only comes out untaxed if it is used to pay for college and college-related expenses. Meaning tuition, fees, books, room and board.

That money should be usable at any school, including a private one. My younger son attended a private college. I didn't work, his dad did, but did not make a six figure income by any means. The older son has attended public community colleges and universities. Both of them have been able to finish school debt free.

As far as I understand, the money can grow forever, but it's only tax free if used for school. If used for any other purpose, the money is taxable. At the beneficiaries rate, so I don't understand what any fuss about this is all about. This is already the case here, unless I missed some interim change in the 529's since they were first set up for my sons. I didn't watch the State of the Union address last night, so I'm certainly not up on any of the specifics.

[ann---]

3. It's a

bow to the GOP. Obama is and always has been Republican-lite, in my view.

[CreekDog]

4. because they are reducing that tax incentive in order to expand another that helps lower incomes

one tax benefit is exchanged for increasing another tax benefit that more directly benefits lower incomes.

http://www.businessweek.com/articles/2015-01-21/obama-s-plan-to-tax-college-savings-accounts-is-less-scary-than-it-sounds

[Sopkoviak]

10. B as in B, S as in S.

If you don't mind my sayin' so.

[CreekDog]

11. I do since you don't seem to understand the statement you're calling BS

[ND-Dem]

34. could you explain? cause i don't get it either.

[Algernon Moncrieff]

35. I'm against any taxation of any funds invested for the purpose of post-secondary education

I would even go the extra step of allowing up to $25,000 placed into 529s to be tax deductible or pre-taxed from paychecks, and to be allowed to be withdrawn untaxed for qualified educational expenses, and I'd do this with no regard for income.

Cut 1 or 2 F-35s if you want to save money. Don't f*** with educational investments. Period. End of sentence.

P.S. I'm not making 6 figures, and part of the reason my kids will be able to afford college is our use of 529 funds.

[Recursion]

6. Because most people who use them make six figures

Which is twice the median household income nationally.

[LiberalAndProud]

16. Yea, I think this may not be the site or the party for you, Sop.

The internet is a big place. It's possible a person with your political sensibilities will find a better fit elsewhere.

[Sopkoviak]

17. The site maybe. But the party?

I've worked for and been a Democrat since JFK, Humphrey, Mondale, McCarthy and the like.

But if you think this site is in anyway representative of the Democratic Party you ma'am are delusional.

[LiberalAndProud]

18. McCarthy ... as in Joseph?

whatev.

[Sopkoviak]

19. If you don't know who Eugene McCarthy was

You're no fuckin' Democrat.

Maybe it's YOU that doesn't belong.

[LiberalAndProud]

22. Okay, then.

Please explain why it is fair that your grandchildren should get TAX FREE dollars to pay for their college educations, while those not fortunate enough to have doting grandparents with the ability to give them such a thing, the waitress who is working her way through college, has to pay tax an every single dime she spends on her education?

What is fair about that policy?

Explain it to me as a fellow Democrat.

[Guy Whitey Corngood]

33. I'm sure the poster knows who he was. They were just making fun of your troll ass. nt

[LiberalAndProud]

37. Sop may have voted for Eugene McCarthy.

Who am I to doubt his word after he clarified? It just didn't feel like a good fit for the poster, given the previous comment.

I'm sad to see he's been locked out of the thread, because I'd really like to read his explanation. Oh well...

[Guy Whitey Corngood]

38. This little gem here makes him sound more like a David Duke voter:

http://www.democraticunderground.com/10026116138#post3

[Guy Whitey Corngood]

32. If you don't like this site. Feel free to get the fuck out. nt

[cpamomfromtexas]

20. You are correct, and I have a problem with taxing "gains" that are really just due to inflation too!

I think there may be a correlation between success and a low post count.

Democrats used to be for everyone having a fair shot, now they're more about screwing you over if you have anything! Nevermind that you've worked a lifetime for it or that inflation may be causing you to have "paper gains". And nevermind that you might want to leave something to your kids.

[kcr]

23. There it is

Oh, the jealousy. If only they'd just shut up and pay their unfair tax burden already

[tammywammy]

24. 6 figures is nothing?

Median household income is $51,900.

[MADem]

27. I'd love to have some of that nothing!

I've got a few relatives who would dearly love to be in the "nothing" club as well!

[joeglow3]

21. And this is why I won't invest in Roth's

Sorry, but the day will come that some politician will say "only the rich use these, so lets back out of our agreed upon treatment."

[Recursion]

36. All capital gains should be taxed, period, in my opinion

It's income just like anything else

[joeglow3]

39. I am not say you are wrong.

Just saying I will take the deferral today in a traditional.

[subterranean]

7. It would be replaced with expanded higher ed tax credits.

Any contributions already made would presumably be grandfathered in under the old rules.

I think the idea behind Obama's proposal is that direct tax credits would be a more efficient way of gearing the tax benefits toward middle-class students and families. While more than half of 529 plans are currently owned by families making under $150,000, the bulk of the tax savings go to upper-income families (over $250,000) simply because they are able to put more money into the accounts and are in higher tax brackets.

But as you said, the proposal will probably go nowhere in the Republican-controlled Congress.

[CreekDog]

13. There's an article saying just what you said:

http://www.businessweek.com/articles/2015-01-21/obama-s-plan-to-tax-college-savings-accounts-is-less-scary-than-it-sounds

and I posted an OP about it:

http://www.democraticunderground.com/10026117869

[subterranean]

14. Thanks for the links. n/t

[Ykcutnek]

8. The people who need help have nothing left of their check, after bills,

to put in a 529.

It's a grand idea.

[aikoaiko]

15. It's like when they limited flex spending accounts to 2500 to help pay for ACA

I lost a few hundred dollars on that one

[davidn3600]

25. No, you see...this is about "the future!" The present and past can go screw themselves...

That's the message I got from this whole plan.

Also, if you are poor, you can go to community college for practically free right now through pell grants! You don't need this to pass congress! It is already there. My mother back in the 1990s went to community college for almost nothing because of pell grants. That's not leading to a rush of enrollment today.

What's the point of this plan other than to screw everyone who saved for college or took out loans?

[LiberalAndProud]

29. I'd sooner get it right now than not at all.

People who have been the victims of predatory lending practices in the guise of student loans are entitled to some relief. It needs to happen. Still, why perpetuate bad policy? Correcting policy isn't aimed at screwing your generation. Your generation got screwed already. Let's fix it, okay?

[CreekDog]

31. What you got from the plan is not from reading the plan

So any opinion about it is not really worth stating.

The tax benefit will remain in another form. For previous contributions to the 529 account, it will remain.

For the future, there will be a tax credit for tuition paid, so if you pull the money out of the 529, it will be taxed, but there will be a tax credit to offset it on the income side.

But think what you want, whatever makes you feel better.

[LynnTTT]

30. I think I understand

I believe the tax burden falls on the student who actually gets the money. So the person (parent/grandparent) doesn't get hit with a tax bill. The recipient will theoretically be in a much lower bracket.
I'm still not sure I understand the whole thing.