Associated Press
May 02, 2008 01:16 pm
—
MONTGOMERY, Ala. (AP) — The state Legislature is ready to provide a tax break to Alabama parents who save for their children’s college expenses.
The Alabama Senate voted 28-0 Thursday to give final passage to a tax break bill that passed the House 90-0 in March and now goes to the governor.
The bill provides a state income tax deduction of up to $5,000 per year for contributions to either of Alabama’s two state-sponsored college savings plans. Contributions beyond that are not deductible.
For the tax break to take effect, the Senate also must pass a separate bill involving real estate sales by out-of-state residents. That bill, which has already cleared the House, could come up for a vote next week.
State Treasurer Kay Ivey oversees state government’s two college savings plans and is pushing the tax break to help parents.
“This is an incentive to save so your children can have hope and aspirations to pursue education beyond high school,” Ivey said after watching the Senate’s vote Thursday.
The bill applies to the Prepaid Affordable College Tuition Plan, which allows parents to pay when a child is young for four years of college tuition in the future, and the Alabama Higher Education 529 Fund, which allows parents to invest money and use the proceeds to pay college expenses.
Children who go to college using the savings plans are already exempt from paying state and federal income tax on the money withdrawn from them.
The tax break bill, sponsored by Rep. Richard Lindsey, D-Centre, will only take effect if the Legislature passes a separate bill that would ensure out-of-state residents who sell property in Alabama pay taxes by withholding the taxes when the property is sold rather than allowing the seller to pay later.
Legislative fiscal experts predict the second bill could generate as much as $3.5 million annually, while the college savings tax break would cost about $1.5 million.
The two bills are tied together because the Alabama Education Association, one of the state’s most influential lobbying groups, insists that any tax break be accompanied by a new revenue source that will keep public education from losing tax money, proponents said.
On the Net:
House bills 43 and 356 at: http://www.legislature.state.al.us
Copyright © 1999-2008 cnhi, inc.