House tax plan allows unborn children to have college savings accounts
Posted November 3, 2017 2:45 p.m. EDT
NEW YORK (CNNMoney) — A change to college savings accounts in the Republican tax plan would expand eligibility to unborn children.
The tax-advantaged accounts, called 529s, help people save for future college expenses. Anyone -- a relative, a friend, or yourself -- can be named as a beneficiary at the time the account is opened.
The House legislation unveiled Thursday would allow unborn children to be named as a beneficiary as well. It defined an unborn child as a "child in utero" and further as "a member of the species homo sapiens, at any stage of development, who is carried in the womb."
The proposed change was praised by anti-abortion groups.
"A child in the womb is just as human as you or I yet, until now, the U.S. tax code has failed to acknowledge the unborn child -- all while granting tax breaks for those seeking an abortion under the pretense of 'healthcare,'" said Jeanne Mancini, President of March for Life, in a statement.
Planned Parenthood, on the other hand, blasted the move, suggesting that defining an unborn child in the tax code would end up restricting access to abortion.
"It is absurd that House Republican leaders would use a tax bill to try to advance their agenda to undermine access to safe, legal abortion," said Dana Singiser, Vice President for Public Policy and Government Affairs at Planned Parenthood Action Fund.
Currently, even without a change to the tax code, parents can open a 529 account in their own name before a child is born and change the beneficiary at a later time. There are no tax consequences for changing the beneficiary to another family member, according to the IRS.
The 529 college savings accounts are offered by states, which determine contribution limits and the tax advantages. Typically, investments grow tax-deferred and withdrawals are not subject to federal taxes if the money is used for qualified education expenses. Some states offer a state tax deduction on contributions or exemptions on withdrawals.
The unborn child provision is not the only proposed change to 529 accounts included in the House plan. It would also allow up to $10,000 per year in savings to be used for private elementary and secondary school expenses. But, it would end the Coverdell savings account program which currently allows parents to save for those K-12 expenses.