Families putting a lot of money away for college would get a break under a change proposed by the Idaho Tax Commission and introduced Monday by the House Revenue and Taxation Committee.
Under current law, savers who roll over Idaho college savings plans to another state’s “529” plan, must pay back taxes on any income previously deducted from their Idaho personal income tax liability.
The problem, says the Tax Commission, is that taxpayers are required to pay Idaho income tax on the entire transfer, even it wasn't all eligible for a deduction. Individuals are able to deduct $4,000 annually from their taxable income, or $8,000 for couples, for money put in state-approved college savings accounts. Some families deposit larger amounts and Idaho is assessing tax on the full amount of any rollover to another state's savings plan.
“It’s really a fairness issue,” Dan John, a Tax Commission staffer, told the committee. The commission estimates the change will cost the state less than $25,000 a year.
The committee also introduced a Tax Commission bill that would eliminate double sales tax refunds to retailers and financial institutions on financed purchases that subsequently enter default. The commission estimates the change will save the state $500,000 annually on double refunds claimed on automobiles, appliances and other financed goods.
Commission staffer Ted Spangler said both retailers and purchasers of debt are filing claims for the refund of sales taxes paid by consumers who fail to pay off their bills.
“There are a lot of claims being paid twice,” Spangler told the committee.
The bill would change the law to presume that a partial payment on a financed purchase would first apply to Idaho’s 6 percent sales tax.
Hearings on both bills will be held later.
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a guarantee
guaranteed the Rev/House will hose both these issues.
college plan.
The result will be, brokers have clients deposit money into the Idaho College Savings plan to get the deduction (with Vanguard investments). The next day, the broker rolls the money over into some other state's plan that pays a commission to the broker. An impact to Idaho's budget? No. But it also is just sending money out the window since the investor (broker) planned to stick in the money in the other plan to begin with. A deduction for a little paperwork. Thanks.
financed sales tax.
The refund on financed sales is SOOO screwy it will only be messed up further. To change the rule to make the first payment toward the sales tax-- what about prorating it? IF I buy a car and make 1 payment that 1 payment is automatically 100% sales tax? Where's the "fairness" in that? Who says the state is first in line? If the financing is a default, the sale was pretty much a default. It's much like a return of product after Christmas. But if it was financed 'in house' then all of a sudden it changes. A returned credit purchase causes 1005 refund of sales tax. Such transactions should be treated similarly- AND fairly for all parties involved.