Alabama PACT program

[Deleted]

Alabama's prepaid college tuition program has financial problems because of investments. They closed it one month after I enrolled my oldest grandson for one year's college.

Tuition was not guaranteed. The legislature tried to appropriate money to stabilize it, but the rising cost of tuition at UA and AU messed that up. There is now a settlement being reviewed by the courts (lawsuit filed) that freezes tuition at 2010 level. That is less than I contributed with ten years left before he goes to college.

So I am moving the money to the state's 529 program. The problem is that PACT is not a 529 and does not rollover. I had to file to withdraw the $$$ and then deposit the money into the 529.

Will I have to pay taxes on the PACT's earnings, if there were any? The state of Alabama gave a credit for the money contributed to PACT. I am guessing I will have to declare the refunded $$$ on my state return, but since I will then put them into the 529, shouldn't that be a wash?

And people wonder why ordinary people don't like to invest. The representative at PACT told me to "contact my tax professional." I don't HAVE a tax professional. We have so little income/deductions that we file the short form for federal.

[mwcpa]

if you move the Alabama PACT (which from my read is a type of 529 plan) to another 529 plan within 60 days of the withdrawal from the PACT then you have a qualified rollover, no income tax should be due.

In regards to the Alabama credit, that is something I am not comfortable discussing, you should probably reach out to an individual who is better qualified to review such with you. Maybe you can reach out to the state tax department and ask them.