17
Aug

529 College Savings Plans

Each state has the ability to establish a 529 plan as long as it meets federal regulations. 529 plans, which can be used at most colleges and universities, offer the potential for tax-free earnings if they are used to pay qualified education expenses such as tuition, room and board. Non-qualified withdrawals are subject to income tax, as well as a 10% federal income tax penalty. In contrast, state sponsored pre-paid tuition programs allow participants to “lock-in” tuition rates at eligible state colleges or universities with either a lump-sum payment or monthly installments.

With 529 college savings plans, the contributor owns the account and funds. In that way the money can be controlled so it is used specifically for educational expenses. The account is excluded from the contributor’s estate in the event of death, and can be transferred to another family member if the child does not go to college. Also, gift taxes are avoided for contributions up to $55,000, and there are no income limits on participation. When saving for anything big move like putting your child through college – it’s important to think about how you cut your costs too which in turn will save you money. Have you check with us to see how much you can save on auto and home insurance. Every penny counts…

-Robert Catalano