With the cost of going to college increasing more and more each year, parents and grandparents need to start saving now. Many students and families are faced with the tough decision of how to pay for higher education—it is a tragedy when families have to make the decision not to attend college due to the inability to afford tuition cost. I have always been an advocate for making it possible for young people to attend college—I have personally sent five young adults to college! The best way to ensure your loved one gets a college education is to save for the expense. A 529 savings plan is recommended as a great investment for your future college plans.
These savings plans do not get taxed federally and many states also give a state income-tax credit for having one. Check whether your state offers a tax break and take advantage of it. To escape federal taxes on the distribution, you must use the 529 savings to pay for qualified educational expenses such as tuition, books, fees, room and board. Don’t worry, the 529 accounts are flexible. If your child doesn’t want to go to college, you can transfer funds to another family member without losing the tax benefits. If you do need to withdraw the money and use it elsewhere please know you will pay taxes on the distribution and a 10% penalty on the earnings. Buy a 529 savings account directly from your state and you will avoid paying commissions or adviser fees. According to Klipinger.com more than 60% of investors put their 529 money on autopilot by choosing age based portfolios.
Showing posts with label college saving. Show all posts
Showing posts with label college saving. Show all posts
Monday, May 17, 2010
Wednesday, August 26, 2009
College Saving: How To Avoid Losses, Save On Taxes
It is back to school time for kids and college students alike. As such dozens of news outlets are running stories on saving for college. Yesterday, I came across this interesting article from Philly.com explaining how to save for college while avoiding losses. Check out the text of their article below, or for more information your can read this article on the RDTC Tax Help Blog titled Top 10 Tax Planning Tips for Families with Children.
As parents of young children see teenagers head off to college for the fall semester, they may be fretting about how they'll be able to meet the rising cost of tuition when their time comes.
That includes looking at 529 plans that offer special tax benefits on college savings and are named after the Internal Revenue Service code that regulates them. Accounts can be set up through a state agency or pre-paid university and college programs.
Let's look at the tax advantages, the home-state factor and the best way to protect the account from market losses.
Q: What are the tax advantages of a 529 plan?
A: Earnings in 529 plans are not subject to federal tax, and in most cases you do not pay state taxes as long as you use the money for eligible college expenses. That typically means tuition, room and board, and mandatory fees. Books and computers also qualify when they are required.
Money taken out of the account for reasons other than college expenses will be subject to income tax and a 10 percent federal tax penalty.
The Securities and Exchange Commission offers an introduction to 529 plans with some basic information on taxes and other issues on its Web site at: http://www.sec.gov/investor/
College Saving: How To Avoid Losses, Save On Taxes
It is back to school time for kids and college students alike. As such dozens of news outlets are running stories on saving for college. Yesterday, I came across this interesting article from Philly.com explaining how to save for college while avoiding losses. Check out the text of their article below, or for more information your can read this article on the RDTC Tax Help Blog titled Top 10 Tax Planning Tips for Families with Children.
As parents of young children see teenagers head off to college for the fall semester, they may be fretting about how they'll be able to meet the rising cost of tuition when their time comes.
That includes looking at 529 plans that offer special tax benefits on college savings and are named after the Internal Revenue Service code that regulates them. Accounts can be set up through a state agency or pre-paid university and college programs.
Let's look at the tax advantages, the home-state factor and the best way to protect the account from market losses.
Q: What are the tax advantages of a 529 plan?
A: Earnings in 529 plans are not subject to federal tax, and in most cases you do not pay state taxes as long as you use the money for eligible college expenses. That typically means tuition, room and board, and mandatory fees. Books and computers also qualify when they are required.
Money taken out of the account for reasons other than college expenses will be subject to income tax and a 10 percent federal tax penalty.
The Securities and Exchange Commission offers an introduction to 529 plans with some basic information on taxes and other issues on its Web site at: http://www.sec.gov/investor/
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