White House Withdraws Proposed Change To Tax Treatment Of 529 Plans, But Other Aspects Of Tax Proposal Remain

Matt LaRocca |

Last week, we wrote about the White House’s proposal to tax withdrawals from 529 plans, even if they are used for qualified education expenses. Facing pressure from politicians on both sides of the aisle, the White House abruptly withdrew the proposal this week. Based on the public’s emotional reaction to the proposal, it is unlikely that the current law governing 529 plans will be changed in the near future. The White House still plans on pushing forward with other proposed changes to investment-related taxes, however. Among other things, those in the highest tax bracket would pay capital gains taxes at a rate of 28%. Additionally, most beneficiaries inheriting stocks and other investment assets would no longer receive a “stepped-up” tax basis; instead, the original tax basis for the asset would transfer to the beneficiary. This tax basis change would apply to most gifts of stocks prior to death as well.

Below are links to two articles addressing these changes in more detail:

Bloomberg Article

Forbes Article