Ten reasons to Consider a 529 Plan

529 college savings plans have helped millions of families save for college and at the same time lower their tax liability. Depending on your personal financial situation, this could be an excellent solution for you as well. Following are 10 reasons to consider a 529 for your family:college

  1. Tax-free growth. Investment earnings grow tax-free in a 529 college savings plan.
  2. Tax-free withdrawals. Withdrawals are exempt from federal taxes if used for qualified higher education expenses, such as college tuition, fees, and generally room and board.
  3. Possible perks from your state. Your state may offer tax breaks and other benefits (for example, reduced or waived program fees, matching grants, and scholarships to state colleges) for choosing its 529 savings plan.
  4. No income restrictions on who can contribute. Even high-income individuals can contribute to a 529 plan – and enjoy the tax benefits.
  5. You are in control. The person who opens the account (the account owner) controls the account, not the student.
  6. You can reclaim the funds. Most 529 plans will allow you as the account owner to reclaim the funds in the account for your own use, although you will owe income tax and a 10% tax penalty on the earnings if you do.
  7. You can change beneficiaries. If the account’s beneficiary decides not to go to college, you can name another member or his or her family as the beneficiary. 
  8. A unique gift tax advantage. A special tax rule that applies only to 529 plans allows you to combine five years’ worth of annual gift tax exclusions and contribute up to $70,000 ($140,000 for married couples who file jointly) per beneficiary in a single year without incurring the federal gift tax or reducing the amount that can be excluded from your estate later on. (You must outlive the five-year period, or a prorated portion of your contribution will be included in your estate for estate tax purposes. Please consult your tax advisor for more details.)
  9. Low impact on financial air eligibility. When determining eligibility for financial aid, savings in a 529 plan are generally treated more favorably than savings in a regular account held in the student’s name. 
  10. Assets are protected from bankruptcy. Assets in a 529 plan are generally protected from your creditors, if the account’s beneficiary is your child, step-child, grandchild, or step-grandchild.

For detailed information about 529 plans you can visit the IRS website at: https://www.irs.gov/uac/529-Plans:-Questions-and-Answers or contact a Copper Leaf Financial advisor at one of our Vermont locations:

33 Blair Road, Williston, VT 05495 | 802.878.2731

49 North Main Street, Rutland, VT 05701 | 802.878.2731