"Me" <hlpme2004[at]hotmail.com> wrote:

- quote -

The law is quite specific in its wording. Qualified
distributions are tax free. Don't know why you are so
surprised. Its no different than Roth IRAs which have been
around for several years as a tax free qualified withdrawal
vehicle.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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hlpme2004[at]hotmail.com (Me) wrote:

- quote -

Yes, tax free, so long as it's spent on "qualified
educational expenses". What is a qualified educational
expense for the purposes of a 529 Plan is pretty liberal,
because it includes room and board (up to the rate the
institution uses for financial aid computations) as well as
tuition, most mandatory fees, and required books, materials,
and supplies. Other tax breaks, such as the Hope credit,
Lifetime Learning credit, and tuition adjustment to income
only cover tuition and mandatory fees, not books, materials,
supplies, or room and board.

- quote -

Not always, sometimes Congress and the President have
decided that it's good public policy to give favorable tax
treatment to certain ways of saving or spending money.
Spending money on higher education is considered a Good
Thing in most circles, and giving tax breaks to the vast
middle class which does so is in the self-interest of
officials who hope to be re-elected.

- quote -

Pub. 970, "Tax Benefits for Higher Education", is a good
place to start.

--
Chris Green

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Me wrote:

- quote -

See IRS Pub 970 starting on page 43 "Qualified Tuition
Program." And yes, it is quite possible that a distribution
will be tax-free. Prior to 2004, the earnings distributed
by a qualified tuition program (QTP) established and
maintained by a college was taxable. Starting in 2004,
distributions from all QTPs (college and state sponsored)
may be tax-free.

--

Alan
http://taxtopics.net

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"Me" <hlpme2004[at]hotmail.com> wrote:

- quote -

Tax free it is - at least for now, with the laws being what
they are - that is one of the big draws for 529s.

Gene E. Utterback, EA

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According to investment literature for one 529 plan,
"withdrawals for qualified higher education expenses are
federal income tax free".

Is that right(!)?

I can understand that the qualified distribution of the
principal is truly tax free, since I believe the
contribtution is after-tax funds. (Right?)

But I would be surprised if the qualified distribution of
earnings in the account is truly tax free. I can believe
"tax deferred". But truly "tax free"(!)?

I thought the IRS always gets its "pound of flesh"; it's
just a matter of when and at what and whose tax rate.

Are 529 plans discussed in any IRS Pub (which)?

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