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College Savings Plans Still Tax-Free, For Now

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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 They provide investments with tax-free earnings if the money if eventually withdrawn for education expenses.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.

Updated March 21, 2011 and originally published September 19, 2006. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

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