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senate Bill S. 335

Letting Students Use Untaxed Savings (529 Plans) to Buy Computers for College

Argument in favor

Allowing college students to use funds from 529 plans to buy computers and eliminating redundant paperwork requirements are common sense reforms. More needs to be done, but this is a positive step.

JennyHayes's Opinion
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07/16/2016
I struggled to purchase a laptop for college. I didn't have a college saving's account or anything like that but there's no financial aid for computers. Any legislation to help students purchase an item that is necessary and required for all their classes should be passed.
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Peter's Opinion
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07/17/2016
As a professional. All my equipment is tax free, including my computer, makes sense that a student is a professional student, and allowing school equipment including the computer (absolutely required these days) to be tax free will just teach kids the ways of capitalism. And let printers be tax free, and paper, and rulers and calculators, that's what it is for me. Or fix the tax system, that's a good option too. But until then, treat school like a job.
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Ilyanep's Opinion
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07/16/2016
Laptops are basically a required tool for college these days. If books are covered, so should laptops be.
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Argument opposed

Taxing distributions and refunds from 529 plans brings in revenue that could be used to fund other education-related programs. These savings plans tend to disproportionately benefit the rich who can afford to pay.

operaman's Opinion
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07/16/2016
While I see a natural benefit for allowing the use use of 529 funds to purchase a computer for college, my future vision sees 529 creep. Gotta have a printer to turn in papers. Or a special desk or chair for a bad back. I would rather see a plan like a 401k. You borrow against the plan tax free for a later payback. My future vision also sees a student dropping out and selling his fancy computer for money to drive/travel back home or maybe a trip to Miami and fund.
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Nicholas's Opinion
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07/17/2016
Poor kids don't have savings, this helps richer families, that don't need help as much.
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Becca's Opinion
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07/17/2016
Students use computers for things outside of schoolwork just as often as they do. Computers last longer than the four average time they are in school. Student loans can be used to buy computers and colleges and university libraries have printers and computers available to students.
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What is Senate Bill S. 335?

This bill would amend the Internal Revenue Code to clarify that college students can use funds from 529 college savings accounts to purchase computers -- if the computer will be primarily used while they’re enrolled at an eligible educational institution.

Introduced in 1996 to incentivize taxpayers to save money for their young relatives, 529 plans are college savings accounts that are exempt from federal taxes. These funds could only be applied to eligible institutions of higher education.

Under this legislation, distribution aggregation requirements for 529 plans would be eliminated. Previous changes in the tax treatment of 529 plans made their distributions tax-free, which makes aggregating the distributions unnecessary.

Refunds from colleges to a student’s 529 account would be permitted if they occur within 60 days of the student withdrawing from college. This would be a change from the current law, which subjects refunds to the income tax on earnings and a 10% penalty. This would only apply to distribution taken after December 31, 2014.

Impact

College students with 529 plans and their families, college administrators, 529 plan administrators, computer manufacturers, and the IRS.

Cost of Senate Bill S. 335

$51.00 Million
The CBO estimates that this bill would decrease federal revenues by $51 million over the 2015-2025, which would increase deficits by about $4.6 million per year.

More Information

In-Depth: The House passed this bill’s identical companion on a 401-20 vote, and the Senate Finance Committee followed suit on a unanimous 26 to 0 vote.

Despite the overwhelming support for the proposal in its current form, the Senate Finance Committee’s ranking member Sen. Ron Wyden (D-OR) says that he hopes the committee “Can come together on a bipartisan basis to strengthen this legislation and then do even more, particularly for those who need the most help.”


Of Note: 529 plans and those who utilize them to save for college found themselves in the political spotlight after President Obama’s 2015 State of the Union Address. In his speech he detailed a plan to tax 529 funds upon their withdrawal like regular income. This would have ended the tax-free treatment of the college savings, which he and his administration viewed as disproportionately benefiting rich families. That tax revenue would then be used to expand an education tax credit targeted towards low- and middle-income families.

The proposed tax increase on 529 plans was met with hostility from both sides of the aisle, with House Speaker John Boehner (R-OH) and Rep. Chris Van Hollen (D-MD) voicing their opposition to the proposal. The Obama administration ultimately dropped the proposed tax increase.

As of September 2014, there were $240.7 billion deposited in 529 college savings plans. There are about seven million families with 529 college savings accounts, and there are a total of nearly 12 million 529 accounts.


Media:

Summary by Eric Revell
(Photo Credit: Flickr user dumbledad)

Official Title

A bill to amend the Internal Revenue Code of 1986 to improve 529 plans.

bill Progress


  • Not enacted
    The President has not signed this bill
  • The house has not voted
  • The senate has not voted
      senate Committees
      Committee on Finance
    IntroducedFebruary 2nd, 2015
    I struggled to purchase a laptop for college. I didn't have a college saving's account or anything like that but there's no financial aid for computers. Any legislation to help students purchase an item that is necessary and required for all their classes should be passed.
    Like (29)
    Follow
    Share
    While I see a natural benefit for allowing the use use of 529 funds to purchase a computer for college, my future vision sees 529 creep. Gotta have a printer to turn in papers. Or a special desk or chair for a bad back. I would rather see a plan like a 401k. You borrow against the plan tax free for a later payback. My future vision also sees a student dropping out and selling his fancy computer for money to drive/travel back home or maybe a trip to Miami and fund.
    Like (11)
    Follow
    Share
    As a professional. All my equipment is tax free, including my computer, makes sense that a student is a professional student, and allowing school equipment including the computer (absolutely required these days) to be tax free will just teach kids the ways of capitalism. And let printers be tax free, and paper, and rulers and calculators, that's what it is for me. Or fix the tax system, that's a good option too. But until then, treat school like a job.
    Like (23)
    Follow
    Share
    Laptops are basically a required tool for college these days. If books are covered, so should laptops be.
    Like (6)
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    We should reduce taxes to help save money instead, but I suppose this works for this specific issue.
    Like (5)
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    Computers have become necessary to college. Though some schools have 24 hour libraries, it has been helpful for me so far to have my own computer. As long as it is tax free, and the government is not using funds to buy students computers, I don't see it as a problem at all
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    Every student needs a laptop in today's universities it's that simple. There is nothing that the government could do with that money that would be more helpful to students then allowing them to invest in the laptop that best suites their needs.
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    The cost of college is already incredibly high. If this financial burden on the student and their family could be lifted ever so slightly by allowing essential supplies such as a computer to be covered then by all means, we owe them that much.
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    Poor kids don't have savings, this helps richer families, that don't need help as much.
    Like (4)
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    Students use computers for things outside of schoolwork just as often as they do. Computers last longer than the four average time they are in school. Student loans can be used to buy computers and colleges and university libraries have printers and computers available to students.
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    I don't see anything wrong with allowing students to use their savings to purchase a tool that could make them more productive in college and in life in general.
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    Computers are near essential for a modern college education. Libraries do include these, but there's no reason that a families savings should not be able to go towards a machine that will enable easier studies
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    To control which account, taxed or untaxed, with which a student uses to purchase is overregulation. Beyond that, to require a citizen to pay further taxes (on top of sales taxes in most states) on the computer/supplies to obtain an education is not only immoral but illogical, as it makes it more expensive for an already expensive venture for the future of The United States of America.
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    Why not? It's their money!
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    Congress should stay out of it. This thinking usage college costs so much already.
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    I believe this falls within the spirit, if not the letter, of the law authorizing 529 plans. The point is to allow families to save money, tax free, to help pay for college expenses.
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    This is why this country of in debt. The taxes are not what makes a computer to expensive to purchase, and removing taxes on it only hurts the government.
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    Not everyone has enough in their savings to get a computer, tax the rich, support the poor
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    I'm reading the few nay sayers comments and its like f u, I don't have kids so really I don't care about it but jelous that you did, and send them to college, so I want them to fail, since I did...
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    Computers have become an imperative tool for college academics, and so educational funds should be available for it.
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