A 529 Plan offers many tax benefits which are better than depositing funds into a traditional savings account or tapping into your retirement savings. Investment earnings in a 529 Plan are not subject to federal capital gains tax and are generally not taxed by state governments when used for qualified education expenses such as tuition, fees, books, room and board. Plans do vary by state.
Because 529 Plans are different in each state, the same advice applies no matter where you live in the U.S. With federal income tax breaks, possible state tax breaks (in over 30 states and the District of Columbia), simplified tax reporting and flexibility to change investment options or rollover funds, everyone is eligible to take advantage of a 529 Plan.
Do you already have a 529 Plan in place? Depending on how much money you’ve amassed, you might be interested to know that you now have the option (through the 2017 Tax Cuts and Jobs Act) to use up to $10,000 in annual tax-free 529 withdrawals to cover private elementary and high schools costs. While there are a number of benefits to paying for K-through-12 tuition with a 529 Plan, first take into consideration how much you’ve saved, and how much more you will eventually deposit. Because a college education is much more costly, you don’t want withdrawals for earlier education to drain college savings. If you have an impressive balance, by all means, investigate whether the recently passed tax advantage for 529 Plans can be utilized as a tax saving strategy.
We can answer any questions you may have about 529 Plans and offer financial strategies for yourself, your children or grandchildren. Give me a call at (765) 561-3445 or click on our contact form today.
A well kept secret found in the Tax Cuts and Jobs Act of 2017 is…