As 2014 begins drawing to a close and we begin planning for the new year, let’s consider the opportunities to save on our taxes that are still available to us for this year. I am speaking specifically of the 529 College savings plans.
Around this time of year, we spend a great deal of time with our clients helping them to identify ways in which they can reduce their tax burden. A common concept we share with them is the 529 plan, which if you are not aware happens to be a college education savings account. I’m sure many of you just asked yourselves “what does planning for college have to do with tax planning?” Most states give you and incentive to participate in these programs by way of giving tax deductions or tax credits for investing in your or your loved ones future. Your money grows tax free in these accounts and has no taxes or penalties when withdrawals are used on qualified university costs such as, tuition, room and board, books and miscellaneous expenses that accompany attendance at a qualified institution for higher learning.
What if my child does not attend college or doesn’t need all of the money? Well you can always change the beneficiary to another child, your spouse or even yourself. So, it is a win-win scenario. There is no income limit and caps on contributions are quite high. Over half of the States offer some type of tax deduction or credit on contributions made, making it an attractive way to save for college.
I would strongly suggest investigating your options or consulting with your financial planner to evaluation the best course of action for you and your family.
It’s nice to know that there are opportunities to save and benefit at the same time.
Stacia Musleh V.P. IncomeProtectionSpecialist.com