529 to pay off student loans may be possible?

[sylvanthus]

Any thoughts on this if it passes? @The White Coat Investor

"2) permits 529 funds to be used for education loan payments or charitable contributions without being subject to the additional tax for distributions that are not used for qualified higher education expenses"

H.R.529 - 115th Congress (2017-2018): 529 and ABLE Account Improvement Act of 2017

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[scummie]

Any thoughts on this if it passes? @The White Coat Investor

"2) permits 529 funds to be used for education loan payments or charitable contributions without being subject to the additional tax for distributions that are not used for qualified higher education expenses"

H.R.529 - 115th Congress (2017-2018): 529 and ABLE Account Improvement Act of 2017

Sorry, I’m a dum-dum, but what does this mean in plain English? The bill makes it sound like it’s intended for disabled people to benefit from a tax cut.

 

[sylvanthus]

Would allow people to put money pretax into a 529 account in order to pay off student loans and lower the overall taxable income. Someone more financially savy than me could prob tell us more though. Basically, Im looking at it as the possibility of taking 100k of my future income, tossing it into a 529 and avoid taxes on it, then use that 100k to pay down loans saving like 40k in taxes. Maybe I am an idiot though. /shrug.

 

[southerndoc]

This slid under my radar.

 

[coachB]

Would allow people to put money pretax into a 529 account in order to pay off student loans and lower the overall taxable income. Someone more financially savy than me could prob tell us more though. Basically, Im looking at it as the possibility of taking 100k of my future income, tossing it into a 529 and avoid taxes on it, then use that 100k to pay down loans saving like 40k in taxes. Maybe I am an idiot though. /shrug.

Don't know anything about this specific bill, but based on what I see, it died in committee.

If it did pass, 529 contributions are after tax money and the gains are tax free. There still could be a benefit to using it for loan repayment if you have something locked in at a low rate and maybe wanted to pay it off ten years down the road with your gains. But your idea of saving "40k" in taxes only happens after you have about 200k+ in gains (depending on your tax bracket and long term capital gains rate).

 

[southerndoc]

115th Congress ends January 2019. Still can be pushed out if enough people write their representatives. Likely would not make it to Senate to be passed quickly enough, but worth a shot for two reasons: remotely could pass, get more reps aware of it so that it has better chances when introduced again in 116th Congress (most likely scenario).

 

[sylvanthus]

Balls, not pretax, but gains not taxed, gooottt it, lamesauce.

 

[The White Coat Investor]

Any thoughts on this if it passes? @The White Coat Investor

"2) permits 529 funds to be used for education loan payments or charitable contributions without being subject to the additional tax for distributions that are not used for qualified higher education expenses"

H.R.529 - 115th Congress (2017-2018): 529 and ABLE Account Improvement Act of 2017

The only real use I can think of it would be in states with a state tax deduction or credit. So you'd put in an amount equal to the credit/deduction and then take it out immediately and send it to your loan servicer. I guess you could get really sneaky, open 30 accounts for all your nieces and nephews, change the beneficiary to yourself for all of them, and then send it to your loan servicer. Might save you a few hundred bucks a year in taxes.