529 College Plans
Are you prepared for future college costs?
Hamilton Cavanaugh & Associates, Inc. can help you start preparing and save on taxes...
In 2001, legislation was passed making it easier for more families to bear the growing costs of college education while allowing tax breaks in the process. The Economic Growth and Tax Relief Reconciliation Act of 2001 grants federal tax exemption on earnings from state college savings plans when used to pay for qualified higher education expenses. Higher education expenses that can be paid with these accounts include tuition, room and board, books and fees, and any other expenses that students are required to pay to attend any accredited college or university in the United States .
All 50 states and the District of Columbia have a qualified tuition program in operation or are in the process of developing a plan. In addition to federal tax exemption, many states also offer significant state tax incentives which include state tax exemption on the earnings and deductions from income taxes based on annual contributions.
Some of the major benefits regarding 529 college savings plans include:
Flexible investment options - Each state plan allows for a participant to select from various broad-based investment strategies. These can range from a fixed interest account to a choice of selected mutual funds.
Anyone can set up an account for a future college student - A parent, grandparent, relative, or a friend may establish a college savings plan provided that contribution limits are adhered to for the beneficiary. In addition, there are no age, income or state of residence restrictions to opening an account. An account may even be set up for yourself with you listed as the designated beneficiary.
Expanded list of qualified expenses - Through the new tax code, expenses qualifying as eligible have been expanded to include fees, eligible room and board, books, supplies, and required equipment at any eligible public or private college or university, trade, vocational or professional school.
Tax advantaged savings - While in an account, earnings are exempt from federal income taxes. Withdrawals used for qualified higher education expenses are also exempt from federal income tax. If you select a New York State plan you may save on New York State taxes on earnings and also receive a $5,000 deductible per year from New York taxable income. A husband and wife filing jointly may deduct up to $10,000 per year in contributions
Some plans even allow for automatic payment withdrawal from a bank account. Depending on your employer, you may even have these payments deducted directly from your paycheck.
Please contact us to find out more information and start saving today.
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