When I signed up for Upromise a few years ago, my intent was to start savings the rebates in a fund for higher education expenses for a hypothetical child I might have some time in the future. At the time, 529 accounts were new. They provide investments with tax-free earnings if the money if eventually withdrawn for education expenses. The tax-free part of the provision was set to expire in 2010, which means that any withdrawals after that time would be taxed.
I decided that I needed to think about my own financial situation and establishing some sort of solidity before worrying about a future child that may not exist. Also, if for some reason this hypothetical child decided not to go to college, I would lose any tax benefit.
As the government normally does, they’ve eliminiated the sunset provision that eliminated the 2010 tax benefit deadline. As a result, familes whose children who do not enter college until after 2010 will still be able to avoid taxes as planned.
I don’t expect all the tax favorable regulations to stay in place forever. Popular thinking is that the government is running out of money in a variety of funds. I find it likely that the government won’t be quick to eliminate programs, so the money is going to have to come from somewhere.
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