‘Tis the season of giving, a time of deal-searching, as well as assessing what our loved ones could use. Here’s a gift you may want to consider: a 529 college savings plan. A 529 Plan is an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. Every state now has a 529 Plan, and the funds can be used to meet costs of qualified colleges nationwide. Saving for college has never been more important, and a 529 Plan offers several significant perks:
- Earnings on your investments are tax-free
- You will continue to have full control over the account, not the beneficiary. Most plans even allow you to reclaim the funds for yourself any time.
- If the beneficiary decides not to go to college, you can name another child the beneficiary, or yourself, if you want to go back to school
- Investment options have improved. In recognition of the volatile nature of the stock market, many 529 plans have added conservative investments, such as certificates of deposits and stable value funds
- You may be eligible for a reduction in your state taxes. There are currently 34 states offering tax deductions or credits to residents who invest in their own state’s plan
- Your contribution qualifies for the $13,000 annual gift tax exclusion. If you make a contribution of between $13,000 and $65,000 for a beneficiary, you can elect to treat the contribution as made over a five calendar year period for gift tax purposes. The money (and the growth of your account) is removed from your estate faster than if your made contributions each year.
So whether you’re hunting for that flat-screen TV or gaming system, don’t forget about the 529 college savings plan. You’ll be giving your child a gift that will keep on giving