529 College Savings Plans Get Better Than Ever
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529 College Savings Plans: Better Than Ever!
Discover the Best Way to Save for College
When it comes to saving for college, 529 College Savings Plans have emerged as the top choice for many families. With nearly 9 million accounts and around $90 billion invested, these plans are worth serious consideration. Here's why they're more attractive than ever.
Tax Benefits and Flexibility
Section 529 of the Internal Revenue Code was established to help families manage the rising costs of higher education. A key advantage of these plans is their tax-free growth. Although contributions aren't deductible on federal tax returns, your investment can grow without being taxed. You can invest in a variety of options, including money market funds, bonds, and stocks.
Legislation Enhancements
Recent changes in the law have made 529 plans even more appealing. The Tax Increase and Protection Act of 2005 extended the "kiddie tax" rules up to age 17, reducing the appeal of traditional custodial accounts. As a result, 529 plans have become a more favorable option.
Additionally, the Pension Protection Act of 2006 ensures that withdrawals for qualified education expenses remain tax-free. This permanency adds significant value to the plan.
Estate and Gift Planning
One of the unique benefits of 529 plans is their role in estate planning. Parents or grandparents can deposit up to $60,000 per child?"double that for a married couple?"without triggering a gift tax. This is due to the allowance of five years' worth of gifting at once, effectively helping to transfer assets out of a large estate while benefiting future generations.
Conclusion
529 College Savings Plans provide unmatched flexibility, tax advantages, and estate planning benefits. For those looking to invest in their loved ones' education, these plans offer a smart and efficient way to prepare for the future.
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