529 Plans Enhanced by PATH Act

Congress passed the Protecting Americans from Tax Hikes Act of 2015 (PATH Act) on December 18, 2015. This introduces two major improvements to 529 college savings accounts, including Missouri’s 529 College Savings Plan or what we otherwise refer to as MO$T accounts. These enhancements are effective retroactively and apply to all of calendar year 2015.

Previously, 529 rules treated a computer as a “qualified higher education expense” only if the beneficiary’s college required it as a condition of enrollment or attendance. But now, under the new law, a computer or peripheral equipment (e.g., printers), computer software, and Internet access or related services are considered qualified higher education expenses-as long as the beneficiary is the primary user of the computer, equipment, software, or services while enrolled in school.

When given a refund from an eligible educational institution of amounts paid out of a beneficiary’s 529 plan account for qualified expenses, account owners can now re-contribute that money into the same or another 529 account for the same beneficiary. Re-contributed refunds will not have federal income taxes or penalties associated with them, provided you re-contribute a refund within 60 days of receiving it, and the re-contributed amount does not exceed the amount of the refund. Refunds received after December 31, 2014 and before December 18, 2015 (the date the law was enacted) may be re-contributed by February 16, 2016 (60 days after the law was enacted). It’s the responsibility of the account owner to keep all records of refunds and re-contributions.

Your Moneta Group Family CFO is a wealth of knowledge on the vast array of potential options available to you to help save for your children’s college education.  Utilize the resources you have at hand to help you save for something so important down the road.

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