At a signing ceremony today at the White House, President George Bush signed legislation making the federal tax exemption for Section 529 college savings plans permanent. The federal tax benefits for 529 plans were scheduled to end on December 31, 2010. The permanency provision was included in the Pension Protection Act (H.R.4) approved by Congress last week.
"The signing of this bill is a significant victory for families saving for a child's college education through a 529 plan. Families can now invest long- term for their children's college educations and know what the tax treatment will be when they withdraw their funds," said Jackie Williams, Executive Director of the Ohio Tuition Trust Authority and Chair of the College Savings Plans Network (CSPN).
The Pension Protection Act permanently extends the federal tax exemption on funds withdrawn from 529 savings plans used to pay qualified higher education expenses. Ohio law also permits a state tax exemption on withdrawals used for college expenses from 529 accounts. In addition to the tax exemption, Ohio's 529 plan also offers Ohioans who contribute to a CollegeAdvantage 529 account a $2,000 state tax deduction.
The National Association of State Treasurer (NAST) and CSPN have been working for the past decade to clarify the federal tax treatment of these plans. Members of NAST and CSPN, including Ms. Williams, attended the signing ceremony at the White House. "The signing of this law will increase the number of families saving and investing for college expenses. The uncertainty regarding the tax status of withdrawals not only caused some confusion but also caused some families to delay savings in these plans," said Williams.
Every state and the District of Columbia operate 529 plans. More than 9 million children across the country have been enrolled in these plans with more than $90 billion in assets. Ohio's 529 plan has over $5.2 billion in assets and serves over 750,000 families in Ohio and across the country.
Parents can open CollegeAdvantage 529 accounts and choose from Vanguard, Putnam and Fifth Third Bank investment options by completing new account applications online at www.collegeadvantage.com or by calling 1-800-AFFORD-IT (23306734) to request enrollment kits.
