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What Is a 529 College Savings Plan?
The IRS refers to the plans as qualified tuition plans or section 529 plans.
Some states guarantee their plans against losses.
Are Contributions to 529 College Savings Plans Tax Deductible?
All 529 plans have tax benefits, but contributions are not deductible on your federal income tax return.
Heres a look at how a several states treat 529 plan contributions.
Tax Benefits of 529 Plans
Beneficiaries reap thelargest tax benefitsof 529 plans.
The money contributed on their behalf grows tax-free.
And as long as they use the money for qualified education expenses, their withdrawals are tax-free as well.
With those benefits come hefty penalities if the beneficiary fails to use withdrawals for qualified expenses.
When that happens, the withdrawal is considered income.
What Happens to Unused Funds in a 529 Plan?
Converting a 529 to a Roth IRA allows the money to continue growing tax-free.
A strategic approach can maximize the already-signficant benefits of the plans.
Are 529 College Savings Plans Worth It?
For many families, yes.
Some even guarantee the principal against losses.
Takeaway
Finding and working with a financial advisor is a great idea.
A financial advisor will help keep track of your finances and assist you in attaining your financial goals.
Get to know your Financial Advisor options today for Free!
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