529 Plans Keep Getting Better!

Federal Income Tax-free Treatment of Qualified Withdrawals is Now Permanent!
On August 17th, 2006, President Bush signed into law the Pension Protection Act of 2006 making permanent the federal income tax exemption for 529 plan qualified withdrawals.

On June 7, 2001, the Economic Growth and Tax Relief Reconciliation Act of 2001 was enacted into law.  The 2001 Act provided certain federal tax benefits that were set to expire on December 31, 2010.  The Pension Protection Act of 2006 makes permanent the benefits provided by the 2001 Economic Growth and Tax Relief Reconciliation Act relating to investment in qualified tuition programs.

The passage of the Pension Protection Act of 2006 helps to resolve some uncertainties about current tax law.  Many 529 investors have been concerned for some time about the potential expiration or "sunset" of the provisions in the 2001 Act that applied to qualified tuition programs. Because the expiration of these provisions of the 2001 Act would make earnings from such plans taxable upon withdrawal, even if used for education expenses, many 529 investors had hoped that Congress would make the favorable tax treatment permanent. The passage of the Pension Protection Act grants this wish, effectively making the Section 529 provisions permanent.

It's a Great Time to Consider the Vermont Higher Education Investment Plan (VHEIP)
Vermont Higher Education Investment Plan (VHEIP), Vermont's official 529 college savings program, is designed specifically to help families plan and save for college.  It's a convenient way to save money to pay for future college expenses for a child, grandchild...or even yourself!

Higher education costs are steadily on the rise and a college savings strategy is no longer a consideration, but a requirement for today's parent. Now that President Bush has signed the 2006 Act into law, the Pension Protection Act of 2006 will provide potential and current 529 investors the assurance they need to know that tax incentives will remain available. 

Vermont Income Tax Credit
A Vermont taxpayer (or, in the case of a married couple filing jointly, each spouse) is eligible for a non-refundable income tax credit of 10% of the first $2,500 per beneficiary contributed to VHEIP in each taxable year beginning on and after January 1, 2007 (i.e., a non-refundable income tax credit of up to $250 per beneficiary per taxable year). Rollovers from another state's qualified tuition plan into VHEIP are also eligible for this income tax credit. Pursuant to the Vermont Department of Taxes Technical Bulletin (TB-33), rollovers from another state's qualified tuition plan into the VHEIP are eligible for the tax credit to the extent the amounts were previously contributed to the other plan and provided the funds remain in the VHEIP for the remainder of the taxable year in which the funds were rolled into the VHEIP.

A Vermont taxpayer who previously received this tax credit must repay a portion of that tax credit, up to a maximum of the total tax credits received by the taxpayer, if the taxpayer makes a non-qualified withdrawal or withdrawal resulting from the death or disability of, scholarship award to, or attendance at one of the Military Academies by the beneficiary of a VHEIP account. A taxpayer will make such repayment to the Vermont Department of Taxes through the filing of the taxpayer's State of Vermont income tax returns.

VHEIP is Here to Help
The State of Vermont understands the importance of finding a college savings strategy that meets your unique needs. While costs of college may seem overwhelming, VHEIP offers an easy and flexible way to save for higher education.   VHEIP is a great way to invest in your, your child, or grandchild's future while enjoying tax advantages.

Find out more, or speak with one of our knowledgeable phone representatives, please call 1-800-637-5860.

Remember, nothing can enrich your loved one's future more than the benefits of a higher education.  When you open a VHEIP account, you are opening the door to a brighter future...