University of Virginia

The Future of 529s Suddenly In Peril Under President Obama

Update: Obama pulls his own proposal due to pressure from, well, basically everyone except the totally out-of-touch people that came up with the idea in the first place. So the proposal won’t go through this time, but watch out for the future. You’ve been warned that what you think is “safe” from government taxes isn’t really safe at all.


President Obama is proposing changes to 529 plans that might shock you – he is in favor of taking away the tax-free nature of the accounts, essentially the entire reason for having a 529 in the first place. 

Whether or not he is successful is another matter that will unfold over the coming months. The significant takeaway for parents, though, is that what the federal government giveth, the federal government can taketh away. Families opened 529 accounts with the expectation that favorable tax treatment would continue, and now that is in doubt.

What other areas might the federal government break its supposed promise in future years? Roth IRAs perhaps?

The NY Times has a summary of the proposal here.