October 17, 2017
The Boost Saving for College Act could entice more people to contribute to 529 plans.
Some proposed changes to tax legislation were recently introduced that could make 529 accounts more flexible. These changes could also help make college saving easier and more affordable for low- and middle-income households.
The Boost Saving for College Act, which was introduced by Sens. Richard Burr, R-N.C.; Bob Casey, D-Pa.; and Lisa Murkowski, R-Alaksa, would amend the Internal Revenue Code to modify the tax treatment of 529 plans. Here’s a look at how some of the proposed changes would work, and their implications for 529 account holders.
The Saver’s Credit
One proposed change is that 529 contributions would be eligible for the Saver’s Credit.
This proposed credit would go a long way toward helping lower- and middle-income households contribute to a 529 college savings plan, said the chair of the College Savings Plans Network, Alabama state Treasurer Young Boozer.
Currently, the Saver’s Credit works like this: You might be eligible for at least a partial credit if you earn less than $31,000 (less than $62,000 if you’re married filing jointly) and contribute to a tax-sheltered retirement account, such as an IRA, 401(k), 403(b), or 457(b). Aftertax contributions such as a Roth IRA or aftertax 401(k) also count, but rollover contributions are not eligible for the credit.
The amount of the credit is 50%, 20%, or 10% of your retirement plan or IRA contributions up to $2,000 ($4,000 if married filing jointly), depending on your adjusted gross income (reported on your Form 1040 or 1040A)….
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