College Planning
Balancing college savings with all of your other financial demands is never easy. That is where PathKeeper Financial can help you understand the advantages of saving for college early and how it is possible to receive an education without going into substantial debt. There are many ways to save money for college expenses, but the most commonly used savings program is the 529 Savings Plan.
What is a 529 plan?
A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs. 529 plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code.
U.S. residents of any state, who are 18 years of age or older (or the age of majority in some states), may invest in most state plans. And, anyone who has a Social Security number or Tax ID can be named the beneficiary of the 529 plan. A future college student can be of any age—the beneficiary can even be the same person who sets up the account.
What expenses can the 529 savings be used for?
The money saved in a 529 plan can pay for a range of qualified expenses, including tuition, books, some fees and certain room and board costs at most accredited two- and four-year colleges and universities, U.S. vocational-technical schools, apprenticeship programs, and eligible foreign institutions. In many states, 529 plan savings can be used for tuition expenses at eligible public, private, and religious primary and secondary educational institutions (K-12).
Are there any tax advantages?
Any earnings grow federal income tax deferred and may also be eligible for state tax deductions and/or state tax credits. Distributions for qualified education expenses are federal income tax free.
Prior to investing in a 529 Plan, investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.