![]() ![]() The plans offer affordable, flexible, and tax-advantaged options that can ensure the door of opportunity is open for our children to access post-secondary education. Most states have created innovative programs individually designed to reflect the unique needs of its citizens. It depends upon the education goals and investment needs of the family. The plans offer various investment options that provide a variable rate of return usually based on stock or bond funds, although some plans offer investment options that guarantee a minimum rate of return.Ī. Contributions can vary, depending on individual savings goals. Amounts contributed and any earnings on the account may then be used to pay the beneficiary’s qualified expenses. Savings: Savings plans (also known as investment plans) enable participants to save money in a college savings account on behalf of a designated beneficiary. The program pools the money and makes investments to enable the earnings to meet or exceed college tuition increases in that state. Amounts of tuition (years or units) may be purchased through a one-time lump sum purchase or monthly installment payments. The program will then pay the future college tuition of the beneficiary at any of the state’s eligible colleges or universities (or comparable payment to private or out-of-state institutions). Prepaid Tuition: Essentially, parents, grandparents, and other interested parties may purchase future tuition at a set price today. What’s the difference between a 529 prepaid tuition program and a 529 savings program?Ī. In many states, a participant can receive special state incentives, including state tax treatment that mirrors the federal tax treatment, state income tax deductions/credits and/or other benefits, based on participation in their state’s program(s). These plans allow participants to save money in an account in which the earnings will grow free from federal income tax and, when used to pay for “qualified expenses” may be withdrawn federal income tax-free. A Section 529 plan is a tax-advantaged state-administered investment program that is authorized under Internal Revenue Code Section 529.
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