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Tax breaks, refunds and other tax tips

Paul G. DiNardo CPA

Recent legislation makes Section 529 plans – already one of the most powerful college funding tools – even more attractive. The 529 prepaid tuition plans and savings plans offer generous contribution limits and significant tax and estate planning benefits.

One of the biggest advantages of a 529 savings plan is that you can make tax-free withdrawals to pay for qualified higher education expenses. This benefit was scheduled to expire at the end of 2010, but the Pension Protection Act of 2006 permanently extends the favorable tax treatment.

Taxes and emotional distress Historically, personal injury damage awards and settlements were tax-free. However, 10 years ago Congress amended the tax code regarding damage awards, excluding only damages received for personal physical injuries or sickness. Since then, damages for emotional distress, mental anguish and loss of reputation – without a corresponding physical component – have been taxable. These damages are common in employment discrimination and wrongful termination cases, in which a plaintiff’s injuries may be purely nonphysical.

  Tax breaks, refunds and other tax tips