529 Plan College Planning Tampa Florida
College costs are rising.
If you have kids and want to help them pay for college, the earlier you start a 529 Savings Plan, the more it will grow.
A 529 Plan is like a retirement account for college. You contribute with after tax dollars and are not taxed when the money is withdrawn as long as it is spent on educational expenses. You do have to name a beneficiary but can change it once a year.
Many parents and grandparents start a 529 when their children are young, and then contribute every year until their child is all grown up and ready to start using the funds to go to college.
529 Plan Tampa Florida Big Advantage
Beneficiaries may use their 529 Plan at either a two or four-year college, a technical, vocational or graduate level school in the United States.
Additionally, investments in a 529 account grow tax-free and qualified expenses are distributed tax-free.
Generally speaking, qualified expenses include tuition, fees, books, room and board, equipment and supplies.
You may also take distributions for non-qualified expenses which will be subject to income tax plus a 10% IRS penalty tax.
The big advantage comes when your beneficiary uses the funds – when used for qualified education expenses, it’s tax free for federal taxes and usually tax-free for states!
Each state has their own 529 plan and their own rules about taxability.
Some states even offer a deduction on your state income taxes if you use their plan.
You aren’t required to have a plan in the state you live in, so you can shop around.
Some states offer their residents income tax credits or deductions for using an in-state plan.
Other states are so generous as to offer “tax parity,” or a deduction for contributions to any plan, wherever located. Some states don’t count 529 Plan assets for purposes of state financial aid, inheritance or estate tax purposes, or offer the account special creditor protection.
The rules differ, so it helps to do your research.
529 Plan What should I invest in?
Fund choices in a 529 Plan can range from more than a dozen to very few.
The investments may be actively or passively managed, and performance of funds is reviewed and ranked annually.
No Age Limit
Lastly, there is no age limit as far as who can be a beneficiary on a 529 account. So if you are planning to go back to school, you too can be a beneficiary of your own 529 plan.
Please contact our office if you have any questions regarding this topic.
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