As noted at The College Fix back on January 20, one of the ideas you’ll not likely hear about in President Obama’s tax machinations is the repeal of tax-free 529 college saving plans.
The president wants these plans now to be taxed as ordinary income, with as rates as high as 39.6%.
529 plan expert Joe Hurley says this “will result in their effective repeal, as new contributions in will ‘dry up’ overnight.”
But ironically, Mr. Obama took quite advantage of 529 tax rules back in 2007.
You see, back in 2007, Barack and Michelle Obama made a stunning $240,000 contribution to the 529 plans of their two daughters. There’s a special provision in 529 tax rules that allow for a “jumbo” contribution in exchange for not gifting any more money to your kids for the next five years. The Obamas (wisely) took advantage of this–you can see the actual tax form reporting here.
This is odd, considering some of the nasty things the White House has said about 529 plans in recent days. Administration officials have called 529 plans “inefficient,” that 80% of the benefits accrue to those making more than $250,000 per year, and that 529 plans should effectively be repealed in order to plus up an education tax credit.
Forbes writer Ryan Ellis points out this presidential hypocrisy is not unlike that from 2009 when the president wanted to nix 1,700 low income school scholarships for kids in Washington DC … all the while sending his daughters to the exclusive Sidwell Friends School.
The same daughters who will benefit from that formerly tax-free 529 education plan.
IMAGE: YouTube screencap