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Financial Planners Call for Major Change in 529 College Savings Plans
August 8, 2006
The President of the Financial Planning Association® (FPA®) has written to leading 29 state lawmakers urging them to support legislation that would broaden the tax deduction available under those state’s 529 college savings plan and align it more closely with the plans of other states.
“Anything that encourages Americans to save for college is important, so legislators should eliminate artificial barriers that discourage such savings,” said FPA president Daniel B. Moisand, CFP®. “A Section 529 plan is not the only way to save for college, but if someone decides to go that route, their decision should be based on the quality of the savings plan itself, and not be complicated by a state’s tax deduction limitations.”
To encourage the expansion and adoption of 529 College Savings Plan parity legislation, Moisand wrote to state lawmakers encouraging them to back legislation similar to Pennsylvania’s. That state has become the first state to implement 529 tax parity. It allows residents to obtain a tax deduction of up to $12,000 regardless of which state 529 plan residents decide to invest in. Maine and Kansas have passed similar measures, though those laws will not go into effect until 2007. But most states allow a deduction only if families invest in the plan offered by the state in which they reside. FPA is also calling for the elimination of state taxes on the withdrawals from out-of-state accounts as long as they are used for legitimate educational purposes.
College savings are an important part of the financial plans which many of FPA’s 28,000 members help formulate for families trying to secure their financial future. In his correspondence to state officials, Moisand wrote, “Next to purchasing a residence, college planning is the second highest expenditure incurred by most families. The new plan parity makes it easier for families to save for future educational expenses.”
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