Paying for Education Is As Simple As 529

May 29, 2019

A good education can bring a lifetime of benefits – but no one wants to spend a lifetime paying off the bills. If you’re ready to start saving for a child’s education, one option to consider is a 529 plan.

A 529 plan is a tax-smart way to help your family pay tuition and other qualified education expenses. And you can use May 29 – or 5/29 Day – as your reminder to start or contribute to a 529 plan.

What can a 529 plan do for you?

A 529 plan offers:

  • Tax advantages – Any earnings growth is tax-deferred, and withdrawals are federally tax free when you use them for qualified higher education expenses. With recent federal tax reform, you can use up to $10,000 per year, per beneficiary, to pay for tuition expenses at a public, private or religious elementary or secondary school. You’ll want to talk to your tax professional before you make a withdrawal, however, because not all states recognize this expanded 529 use.
  • Flexibility – Anyone can contribute to a 529 plan, which makes it a unique gift idea for family and friends. But if a child or grandchild ends up not needing the account or doesn’t spend all the money, you can transfer it to a qualified family member.
  • Control – As the account owner, you control the assets in the plan for the life of the account.

So on May 29, make a note to contact your financial advisor about starting or contributing to a 529 plan.

Important Information:

Withdrawals used for expenses other than qualified education expenditures may be subject to federal and state taxes, plus a 10% penalty on the earnings. Contributions may be eligible for a state tax deduction or credit in certain states for residents who participate in their own state’s plan. 529 education savings plans may reduce a beneficiary’s ability to qualify for financial aid. Please consult with your tax advisor regarding the tax implications of 529 education savings plans. Some states’ 529 plans may also recognize certain elementary and secondary tuition expenses as a qualified expense. Before using funds for elementary and/or secondary tuition expenses, please consult with the plan sponsor and/or a qualified tax advisor to avoid incurring potential state tax consequences and/or penalties.

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