In addition, you may be subject to a 10% withdrawal penalty, if not used for education. If your child chooses not to go to college, or studies abroad in a school that is not 529-accredited, you have to pay taxes on the earnings. You can, but you have to pay taxes on the earnings. You can’t change your mind and instead, use the money to buy a Tesla. The main disadvantage of saving through a 529 college savings plan is the money has to be used for education. What are the disadvantages of a 529 college savings plan? You can change the beneficiary to your other daughter. Let’s say you opened one for your first born.
VIRGINAI COLLEGE SAVINGS PLAN COLLEGE SAVINGS PLANNER FULL
Can be used for graduate school (in case your child gets a full scholarship for college). You can use the money not just for tuition, but for other education expenses like room & board, computer, books and school supplies. The 529 college savings plan also offers some flexibility. In addition, the parents generated more than $10,000 in tax savings through the plan, for a total benefit of more than $40,000. This assumes that the parents saved $64,000 and they generated a certain investment return in their 529 savings plan. In the graph below (from the Journal Financial Planning), we can see that saving through a 529 savings plan enabled the parents to earn more than $29,000 more in investment earnings, compared to a bank account. Let’s look at how much tax savings you can generate by saving through a 529 college savings plan. So to answer your question of “Is 529 tax deductible,” the answer is yes, if you live in the more than 30 states, including the District of Columbia, that offer this perk. In some states, you can deduct your contributions from your state income taxes, up to a certain amount. It will grow tax-free, as long as you use it for education expenses. This will give you the opportunity to potentially grow your money faster. You can invest your child’s college savings in stock funds or bond funds. There are three main advantages of saving through a 529 savings plan. But if you do that, this money will not really grow, and you have to pay taxes on the interest. You can always save for your child’s college fund by stashing it in your bank account. What are the advantages of a 529 college savings plan? There’s also a 529 Maryland plan and a 529 VA (Virginia) plan. So if you live in DC, DC has its own 529 plan. You can now also use it for K-12 expenses.ĥ29 plans are usually sponsored by states. If you live in DC, Maryland, or Virginia, we will also cover the ins and outs of the 529 Maryland, 529 DC and 529 VA plans.Ī 529 college savings plan is an investment account that you can use to save for your child’s college. You are now able to rollover (from designated beneficiary 529) funds to an ABLE account as long as it is for the same beneficiary or a family member! You can rollover up to the annual contribution limit ($15,000) until January 1 st, 2026.Would you like to start saving for your child’s college? In this article, we will discuss the pros and cons of saving through a 529 college savings plan. ABLE accounts allow individuals with disabilities and their families to save money for disability-related expenses of the account’s beneficiary. 
Advisor to give personal advice in reaching educational planning needsĭid you know you can use a total of $10,000 of your 529 College Savings Plan per year on K-12 education for your beneficiary? Also, did you know you can rollover from the designated beneficiary’s 529 account to an ABLE account for same beneficiary or a family member?Īn ABLE account operates similarly to a 529 account.Employer-sponsored 529 plans offer benefits like: To make it easier for you to save for a family member’s college education, James Madison University is offering a 529 College Savings Plan that allows automatic funding via payroll. With the cost of college tuition continually increasing, most parents/guardians/grandparents can use some help saving for college expenses. Virginia529 College Savings Plan through FIRM & American Funds (JMU Payroll Deduction 529 Plan)
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