Thursday, August 23, 2018

College Savings Plan Adjustment

Our College 529 Plan made two adjustments for 2018.

First, the amount that can be deducted from income has been increased from $2000 to $4000 per year for each beneficiary.   We can take a state tax for contributions up to $4000.    So we will be increasing our contribution from $2000 to $4000 for each beneficiary. 

Second, per federal and our state regulations, College 529 Plan funds can be used for expenses in K-12.   Since we paid over $3000 in tuition for full day kindergarten in public school, I am considering using the 529 plan funds to cover this cost.

Some argue that it is inefficient to use 529 funds for K-12 since there is a reduction of funds for college.  To address this issue, I plan to pay the funds to the student (beneficiary), who can then invest the funds.  The growth in these funds will be tax free since the beneficiary is a minor dependent and can earn up to $900 per year with no taxes.

Of course, funds in the child's name will reduce financial aid packages, but we expect to receive very little needs based aid at this time.

For more on Crossing Generations, check back every Thursday for a new segment.

This is not financial, investment or eductation advice. Please consult a professional advisor.

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