deduct your 529 plan contributions on your state income tax return, up to your state’s limit. Let’s take a look at the most important things to know about 529 plans... Who should contribute to a 529 account? Anyone... If you want your children or grandchildren (or nieces, nephews, other family members... or even yourself ) to attend college, this is one of the best ways of ensuring that they’ll do so. A 2011 study from the University of Pittsburgh found that kids who expect to attend college and have a designated college savings account were four times more likely to attend a four-year college than children with similar expectations but no savings. And anyone can contribute... 529 plans have no income limits, age limits, or annual contribution limits. There are lifetime contribution limits, but they’re in the six-figure range.
This is one of the easiest ways to shelter assets for your children or grandchildren... and save a bundle on taxes while doing so. It varies from state to state, but it – generally – allows you to... • Contribute money to a special account to invest in stocks, bonds, or money-market funds (and often get a break on your state taxes)... • Grow your investments tax-free... • And withdraw the earnings tax-free to pay for qualified higher-education expenses – like tuition, fees, books, computer equipment, and room and board. It’s called a 529 plan ... created by Congress in 1996 as a way for families to invest for college expenses. All 529 plans are sheltered from federal capital gains taxes... And many states let you
By Dr. David Eifrig
American Consequences 19
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