As Congress reconsiders various tax breaks it voted into existence (home mortgage deductions, etc.), could 529s college savings plans, which have exploded in popularity in the past five years, come in for increased scrutiny and possible elimination?
According to a recent report by the United States Government Accountability Office, the revenue lost due to 529-related tax breaks – which include capital gains tax, and estate and gift taxes that are avoided as a result of the use of 529s as an estate planning tool - was an estimated $1.6 billion in fiscal year 2011 alone. In its report, the GAO reiterates its previous recommendation to Congress that it revisit tax expenditures like those from 529 plans from time to time. “We have recommended in the past that tax expenditures be periodically reviewed to determine their effectiveness in achieving specific policy goals, particularly given the nation’s long-term fiscal imbalance,” the report says.