Washington, DC- Today, U.S. Senator Bob Casey (D-PA) announced that his bipartisan legislation to enhance the already successful Section 529 college savings plans has cleared the Senate Finance Committee, setting the stage for the bill to become law this year.
“I’m pleased that the Senate Finance Committee has passed this legislation on a bipartisan basis,” Senator Casey said. “This effort will make commonsense changes to 529s to ensure that they continue to be a vehicle to advance the dreams of families across Pennsylvania and the nation.”
The new bill has three main provisions: the first recognizes the reality that in today’s world, a computer is just as much a necessary educational expense as a required class textbook. As such, this bill allows 529 funds to purchase a computer on the same tax-favorable basis as other required materials.
The second provision eliminates an outdated and unnecessary aggregation rule that increases paperwork and costs.
The third provision provides tax and penalty relief in instances where a student may have to withdraw from school for illness or other reasons. Under current law, any refunds from the college are subject to immediate taxation and a 10 percent tax penalty. This provision eliminates this tax and penalty if the refund is redeposited in a 529 account. This permits a family to set the refund aside to pay for the student’s education should he or she be able to return to college or to use it for another family member.