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HB 515 - Ideal 529 withdrawals

HB 515 - Ideal 529 withdrawals

Phil Haunschild
February 19, 2018

Bill description: HB 515 would exempt the principal amount paid into a 529 education account from taxation on non-qualified withdrawals.

Rating: +1

Does it directly or indirectly create or increase any taxes, fees, or other assessments? Conversely, does it eliminate or reduce any taxes, fees, or other assessments? 

Currently, Idaho offers the Ideal-Idaho 529 College Savings Program. Individuals who have set up these programs can save/invest money in a fund and then withdraw from it for educational expenses. When individuals withdraw from the fund for non-educational expenses they must pay tax on the earnings that would otherwise be exempt.

HB 515 would exempt the principal from tax on these non-qualified withdrawals, only the investment earnings would be taxed. Because individuals put money into the fund post-tax, it is double taxation to charge a tax both prior to the deposit and after the withdrawal.

The Fiscal Note estimates that exempting principal amounts from double taxation would save participants in the 529 program $108,742 per year.


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