What is "IRS section 529"?

IRS section 529 or Qualified Tuition Programs (QTP's) are found under Title 26, Subtitle A, Chapter 1, Subchapter F, Part VIII, Section 529 of the Internal Revenue Code or "IRC". It is considered the most complicated and hard to read section of the Code and a good treatment for insomnia. This section deals with special tax breaks for families, hence the "insomnia effect".

Parents who desire to overcome the skyrocketing tuition costs can utilize IRS section 529 to start saving early for their children's school expenses. Parents have a direct control over how and where their money is being invested. Under the college savings plans investors are not subject to any minimum income restrictions or area-specification where savings plans are concerned.

The Plan does not restrict participation eligibility; anyone can participate regardless of income. Participants name the beneficiary of the account and he will be the one using the money for educational expenses. The owner of the account can change the beneficiary at any time and maintain control of the account for the purpose of determining assets for the expected family contribution for college expenses.

Participants can contribute up to $13,000 per person for each beneficiary they have without having to pay a federal gift tax. Married participants can contribute a total of $26,000 per beneficiary. Participants can contribute up to $335,000 per account. The value of the account may rise above this amount because of increases in the investments but once this amount is reached or surpassed participants can no longer contribute to it.

One of the benefits that attract families to the 529 plan is the friendly tax treatment it offers. Funds withdrawn for educational expenses are not subject to Federal tax and some states allow the participant/investor to deduct the contributed amount from state tax.

Generally speaking there are two types of 529 plans -Prepaid plans and Savings plans. A Prepaid Plan is effective when one wishes to buy tuition credit at the present rate to be used later and the Savings Plan is dependent solely upon the market performance of principal investments. Most 529 savings plans offer age-based asset allocation choices where the underlying investments become more conservative as the recipient approaches the college-going age.

I can go on and on about the pros and cons of the 529 Plan but I would like to shift gears here and look at the 529 Plan treatment in a bankruptcy proceedings.

A 529 college-savings plan assets are not exempt under bankruptcy law if it is held for less than one year. The law exempts 529 assets held for at least two years. If assets are held between one to two years the exemption is limited to $5,000.00. In other words, individuals who participate in 529 Plans and find themselves in need for bankruptcy protection should look carefully at how long their 529 Plans have been in effect before deciding to file.

Article provided by George R. Belche, Attorney at Law, LLC

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Public Input Sought on Proposed SPLOST

The Fayette County Board of Education is exploring the possibility of asking voters to approve a one percent SPLOST (Special Local Option Sales Tax) in November to help the school system maintain its high level of education while lowering property taxes.

A public input session will be held at the Fayette County Board of Education (210 Stonewall Avenue, Fayetteville) on August 28 at 7 p.m. Residents wishing to make comments on the proposal will need to sign up that evening prior to the beginning of the session. Each person will be limited to two minutes in order to ensure that everyone who wants to speak has an opportunity to do so. Doors will open at 6 p.m.; the sign-in sheets will be removed promptly at 7 p.m. Written and emailed comments are also welcome.

Austerity cuts over the last several years have resulted in a loss of approximately $21 million in state funding. That, coupled with rising fuel costs and increased prices for basic supplies, has forced the school system to make some tough funding decisions that could have a direct impact on students.

A one percent SPLOST would generate approximately $100-115 million over a five-year period to help fund needs that have been postponed as well as address future needs. Specifically, the SPLOST would fund debt service ($38 million), which will lower property taxes; technology ($35 million); security ($2.5 million); textbook adoption ($2.5 million); facilities five-year plan and warehouse relocation ($17 million); transportation ($10 million) and an aquatic facility ($10 million) for school swim teams and swimming lessons.

It is estimated that the SPLOST would lower property taxes through a reduction of the school system’s bond millage rate ranging between 0.83 mills to 1.59 mills during the time it is in place. This would lower the property tax bill on a $250,000 home between $83 and $159 each year.
The board of education has until August 4 to adopt a resolution for the SPLOST. If a resolution is adopted by the board and approved by voters in November, the new tax will take effect April 1, 2009.