Author Topic: Trump-Republican tax plan, Bad for large families  (Read 49652 times)

Offline skyguy918

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Re: Trump-Republican tax plan bad for large families
« Reply #255 on: November 28, 2017, 04:50:20 PM »
https://www.bloomberg.com/view/articles/2017-11-28/the-rich-don-t-need-a-college-subsidy

Didn't notice this anywhere before. I'm not a big proponent of 529 plans, but if they can be used to pay for tuition at any level, that's actually help for (certain) frum families. And while the writer's logic seems to be correct in that it helps the "rich", we know that a large frum family making $150,000 is far from rich, yet will send all children to "private" schools.
I'm assuming you know this already, but there is currently a way to accomplish most of what a 529 does and spend it on yeshiva tuition - Coverdell ESA. The limits are ridiculously low though ($2k per kid per year) and there's no NYS income tax deduction like on the 529. I've set them up for my kids, but lately I've been thinking it's more trouble than it's worth.
Unless you start saving for tuition before the child starts school and the fund has gains, how would a 529 help frum families?
You're very much answering your own question. Also, in addition to the advantage of tax-free gains, your 529 contributions (up to $10k per year) are deductible from your NY state income taxes.

Offline ExGingi

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Re: Trump-Republican tax plan bad for large families
« Reply #256 on: November 28, 2017, 05:56:16 PM »
Unless you start saving for tuition before the child starts school and the fund has gains, how would a 529 help frum families?
IIRC 529s can be rolled over from one child to the next. So, if you start with first child, and maximize the contributions every year, by the time the child is a teenager, it might work, and if not, just roll over to the next kid.
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Offline ExGingi

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Re: Trump-Republican tax plan bad for large families
« Reply #257 on: November 28, 2017, 05:58:13 PM »
I'm assuming you know this already, but there is currently a way to accomplish most of what a 529 does and spend it on yeshiva tuition - Coverdell ESA. The limits are ridiculously low though ($2k per kid per year) and there's no NYS income tax deduction like on the 529. I've set them up for my kids, but lately I've been thinking it's more trouble than it's worth.You're very much answering your own question. Also, in addition to the advantage of tax-free gains, your 529 contributions (up to $10k per year) are deductible from your NY state income taxes.
I did Coverdells for two (IINM) of my kids. Pulled it out at a certain point. Limits are low and no NYS deduction, so no huge benefit.

IIRC, there was absolutely nowhere on the tax return to report the distribution/use of funds when I pulled out.
I've been waiting over 5 years with bated breath for someone to say that!
-- Dan

Offline yitzf

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Re: Trump-Republican tax plan bad for large families
« Reply #258 on: November 28, 2017, 05:59:14 PM »
IIRC 529s can be rolled over from one child to the next. So, if you start with first child, and maximize the contributions every year, by the time the child is a teenager, it might work, and if not, just roll over to the next kid.
The frum families we are talking about can barely afford current expenses let alone prepaying tuition years in advance.

Offline ExGingi

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Re: Trump-Republican tax plan bad for large families
« Reply #259 on: November 28, 2017, 06:49:07 PM »
The frum families we are talking about can barely afford current expenses let alone prepaying tuition years in advance.
But if tuition is $2,000-$3,000 up to age 14 or 15, and then it's anywhere between $5,000 and $15,000 per year, a family might put away a some money early on, to make it easier later, especially if there's a tax deduction. A family living in NY on $150,000 (and more) can use a tax deduction, and could still be struggling, getting serious reprieve from this.
I've been waiting over 5 years with bated breath for someone to say that!
-- Dan

Offline yitzf

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Re: Trump-Republican tax plan bad for large families
« Reply #260 on: November 28, 2017, 07:02:26 PM »
But if tuition is $2,000-$3,000 up to age 14 or 15, and then it's anywhere between $5,000 and $15,000 per year, a family might put away a some money early on, to make it easier later, especially if there's a tax deduction. A family living in NY on $150,000 (and more) can use a tax deduction, and could still be struggling, getting serious reprieve from this.
I hear. A family making 150k and contributes 10K will save about $650 in NY state tax.

Offline ExGingi

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Re: Trump-Republican tax plan bad for large families
« Reply #261 on: November 28, 2017, 07:18:32 PM »
I hear. A family making 150k and contributes 10K will save about $650 in NY state tax.
And growth is tax free.

529s also work in Estate planning situations allowing lumping together 5 years of annual exclusions (at least that's what the rule was when I looked at it). But that's definitely a benefit for the rich.
I've been waiting over 5 years with bated breath for someone to say that!
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Offline EJB

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Re: Trump-Republican tax plan bad for large families
« Reply #262 on: November 28, 2017, 07:47:48 PM »
But if tuition is $2,000-$3,000 up to age 14 or 15, and then it's anywhere between $5,000 and $15,000 per year, a family might put away a some money early on, to make it easier later, especially if there's a tax deduction. A family living in NY on $150,000 (and more) can use a tax deduction, and could still be struggling, getting serious reprieve from this.
Yes. IMO itís more about saving for tuition. Tax benefits are a plus. But even if the accounts werenít tax advantaged, it still makes sense to set aside money explicitly for tuition every year.

Offline Qwertyuiop

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Re: Trump-Republican tax plan bad for large families
« Reply #263 on: November 28, 2017, 08:22:06 PM »
That's funny :)

Offline CPA

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Re: Trump-Republican tax plan bad for large families
« Reply #264 on: November 29, 2017, 10:57:41 AM »
As far as I know there is not a limit as to how long funds must stay in the 529 plan before they are withdrawn.

Offline ExGingi

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Re: Trump-Republican tax plan bad for large families
« Reply #265 on: November 29, 2017, 01:45:29 PM »
As far as I know there is not a limit as to how long funds must stay in the 529 plan before they are withdrawn.
IIRC, the last time I checked they can stay as short as you want, but must be used by the time the beneficiary is 30 years old, or rolled over to a qualifying family member.
I've been waiting over 5 years with bated breath for someone to say that!
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Offline CPA

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Re: Trump-Republican tax plan bad for large families
« Reply #266 on: November 29, 2017, 02:01:51 PM »
So you can contribute 10k in 2018 and get the tax benefit (if the state ur living in has one) and the next day pay your tuition from the 529 account. This could benefit everyone not just those who have extra funds to put away to grow tax free.

Offline ExGingi

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Re: Trump-Republican tax plan bad for large families
« Reply #267 on: November 29, 2017, 02:44:17 PM »
So you can contribute 10k in 2018 and get the tax benefit (if the state ur living in has one) and the next day pay your tuition from the 529 account. This could benefit everyone not just those who have extra funds to put away to grow tax free.
Not sure that the specific plan wouldn't have fees that would make that an unattractive option.
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Offline mercaz1

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Re: Trump-Republican tax plan bad for large families
« Reply #268 on: November 29, 2017, 03:56:31 PM »
one problem with 529 plans is that they count towards student loans so you might get reduced amount of federal loans if you have a large amount in a 529 plan

Offline ExGingi

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Re: Trump-Republican tax plan bad for large families
« Reply #269 on: November 29, 2017, 04:00:48 PM »
one problem with 529 plans is that they count towards student loans so you might get reduced amount of federal loans if you have a large amount in a 529 plan
Indeed, though it seems like there are some (limited) workarounds.

But if 529 plans will be able to be used for K-12, financial aid is a non-issue.
I've been waiting over 5 years with bated breath for someone to say that!
-- Dan