Taking Advantage of 529 Plans for College Expenses

With colleges and universities across the country showcased in the NCAA March Madness basketball tournament, this time of year offers a great opportunity to review your college savings plan and make sure that you are on track to send your loved ones to the school of their dreams.

While there are various types of accounts that offer tax-advantaged ways to save towards a college education, the 529 Plan account is one of the most impactful plans due to the significant tax advantages offered and flexibility of the account.

Tax Free Growth

The 529 Plan allows an account owner to contribute funds that will grow tax free if ultimately used towards a beneficiaries qualified higher education expense (Tuition, room, board, books, school supplies, laptops, etc.).

The earlier an individual begins contributing towards a 529 Plan the better, as the accounts have more time to grow and utilize this tax advantage. Account owners can contribute up to $150K in one year to these accounts (5 years of joint annual gift exclusion amount) to “jumpstart” the account.

Flexibility

The 529 Plan is very flexible in nature, allowing funds to be used towards any university in the country, having a wide range of investment options available to help achieve your funding goals, and allowing funds to be transferred to another 529 account with a different beneficiary with no tax penalty.

After recent tax reforms, 529 Savings Plans can now also be used towards private high school tuition (up to $10,000/yr.) with the same tax advantages.

Because of its tax advantages, high contribution limits, flexibility and convenience, the 529 Savings Plan can be a powerful tool to help you achieve your college funding goals for your loved ones.