Obama Drops Plan to Tax 529 College Savings Plan Withdrawals

529-plan

The Obama administration has decided to drop a plan to tax 529 college savings plan withdrawals.

A White House official called the proposed change a “distraction” and said there are plenty of other ways to raise revenue as part of their budget.

According to a source familiar with the matter, in addition to GOP complaints, House Minority Leader Nancy Pelosi had pressed Obama to drop the 529 plan.

Obama had proposed raising $1 billion over 10 years by taxing capital gains realized in withdrawals from so-called 529 college savings accounts. The White House cited surveys showing that 70 percent of the assets in such accounts are held by families earning more than $200,000 per year, and noted that higher income families benefit most from the current tax exemption for such gains.

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Source: CNBC | Everett Rosenfeld

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