The IRS Changes to 529 Plans
Learn about the two new tax perks for these college savings vehicles.
Provided by Rob Taylor
Do you have a 529 plan account? Then you will want to know about a pair of federal tax law changes which may benefit you and your student, one involving a February 16 deadline.
As 2015 ended, Congress passed the Protecting Americans from Tax Hikes Act (PATH). Deep in its fine print were two “sweeteners” – tax changes designed to help parents with 529 plans.
You can now pay for computer hardware & software with 529 plan dollars. Under the old rules, this was rarely permitted. In fact, federal tax law only allowed it if a university or college required students to have certain computer hardware, software, or computer-related technology as a condition of enrollment.1
That restriction is gone now. Starting this year, you may buy computers, computer software, associated hardware, and related equipment with 529 plan funds. These technology expenses now fall under the category of Qualified Higher Education Expenses.1
Refunded 529 plan money may now be reinvested in the plan. Here is where the February 15 deadline matters. If you have received a refund of money that was a 529 plan withdrawal from an Eligible Educational Institution, you can now put it back into the same 529 plan within 60 days. (For tax purposes, you will want a receipt showing when that 60-day period began.)1
Why is February 16 important? Because that is 60 days from the day PATH was enacted, and if you received such a refund at any time during January 1-December 18, 2015, you have until Tuesday, February 16, 2016 to put that money back in the account. If you meet that deadline, the refunded money will not be categorized as a non-qualified 529 plan distribution that is fully taxable and also subject to a 10% penalty.1,2
All 529 plan owners should be aware of these important changes for 2016 and years to follow.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
1 - figuide.com/new-benefits-for-529-plans.html [1/13/16]
2 - forbes.com/sites/josephhurley/2015/07/23/three-mistakes-to-avoid-when-withdrawing-money-from-a-529-plan/ [7/23/15]
Advisory services offered through Global View Capital Management, Ltd. (GVCM). GVCM is a SEC Registered Investment Advisory Firm headquartered at N14W23833 Stone Ridge Drive, Suite 350, Waukesha, Wisconsin 53188-1126. Robert J. Taylor is an Investment Advisor Representative of GVCM which is affiliated with Global View Capital Advisors. GVCM Supervising office 1-262-650-1030.