The Alabama Legislature is rushing to exempt Alabama's college savings plan from state income taxes. The Senate Finance and Taxation-Education Committee voted unanimously today for a tax exemption bill. A similar bill won approval in the House yesterday.
The swift legislative action comes after a recent report by the Morningstar fund rating agency. It listed Alabama as having one of the five worst college savings plans in the nation because withdrawals were taxed by the state. State Treasurer Kay Ivey, who administers the plan, says the pending legislation will encourage more people to save for their children's college education.
The legislation would cover 4,300 Alabamians who are in the plan now and any who invest in the future. The college savings plan is often referred to as the 529 plan because of the section of the federal tax code that covers it. Money in the college savings plan can be used for any college-related expenses, such as room, board and books. Another Alabama program, the prepaid college tuition plan, covers for tuition and mandatory fees.
February 23, 2005