Thursday , 21 June 2018

529 College Savings Plans

529 College Savings Plans

529 College Savings Plans are tax-advantaged college savings vehicles and one of the most popular way to save for college today. 529 College Savings Plans have revolutionized the world of college savings.

Tax advantages and more

529 College Savings Plans offer a unique combination of features that no other college savings vehicle can match:

  • Federal tax advantages.  Contributions to your account grow tax deferred and earnings are tax free if the money is used to pay the beneficiary’s qualified education expenses.  (The earnings portion of any withdrawal not used for college expenses is taxed at the receipient’s rate and subject to a 10% penalty).
  • State tax advantages.  Many states offer income tax incentives for state residents, such as a tax deduction for contributions or a tax exemption for qualified withdrawals.
  • High contribution limits.  Most plans let you contribute over $300,000 over the life of the plan.
  • Unlimited participation.  Anyone can open a 529 College Savings Plan account, regardless of income level.
  • Professional money management.  College Savings Plans are offered by states, but they are managed by designated financial companies who are responsible for managing the plan’s underlying investment portfolios.
  • Flexibility.  Under federal rules, you are entitled to change the beneficiary of your account to a qualified family member at any time as well as rollover the money in your 529 plan account to a different 529 plan once per year without income tax or penalty implications.
  • Wide use of funds.  Money in a 529 College Savings Plan can be used at any college in the United States or abroad that’s accredited by the Department of Education and, depending on the individual plan, for graduate school.
  • Accelerated gifting.  529 plans offer an excellent estate planning advantage in the form of accelerated gifting.  This can be a favorable way for grandparents to contribute to their grandchildren’s education.  Specifically, individuals can make a lump-sum gift to a 529 plan of up to $65,000 $130,000 for married couples) and avoid gift tax, provided the gift is treated as having been made in equal installments over a five-year period and no other gifts are made to that beneficiary during the five years.

For more information or for help in establishing a 529 plan, please call Darrell L. Tate, CFP, Tate Financial Group, LLC, at 972.529.3888,

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