However, if you contribute more money on behalf of the same child during those five years, you may trigger the gift tax. The IRS views the money as an annual $17,000 (or $34,000 for couples) gift over five years. It's also possible to contribute a lump sum of up to $85,000 to one or more 529 college savings plan in a single year (or $170,000 for couples) without being subject to the gift tax. You can typically contribute up to $17,000 a year (or $34,000 for couples) without incurring the gift tax. However, if you invest in your own state's 529 plan or if your state is a "tax parity state," you may benefit from state income tax deductions on contributions or state tax exemptions on withdrawals. ![]() Even better, withdrawals are tax-free as long as you use the money to pay for qualified education expenses, which typically include tuition, books, school supplies and room and board.Ĭontributions to a 529 are after-tax and not federally tax deductible. With a static portfolio, the asset allocation stays the same until you make a change, which you can now do twice per calendar year.Įarnings in a 529 plan grow federally tax-deferred, which means your money has a chance to compound faster because you don't have to pay taxes on current investment income or capital gains. With an age-based portfolio, the fund manager adjusts the asset allocation from more aggressive to conservative as your child nears college age. Your plan may offer a choice between an age-based portfolio and a static portfolio. Most 529 college savings plans allow you to choose from a variety of predetermined asset allocation portfolios that range from conservative to aggressive, based on historic risk and potential return. While your child is the beneficiary, you remain in charge of the money, which is managed by a fund manager assigned by the state. It's important to remember that a 529 account belongs to you. Be sure to check with the school's state 529 plan rules to see if it permits this option. The term "qualified higher education expense" includes up to $10,000 in annual expenses for tuition in connection with enrollment or attendance at an elementary school, secondary public, private or religious school. However, you don't have to live in a particular state to take advantage of its plan. Almost all states and the District of Columbia offer some type of 529 plan. Wealth and Investment Management SolutionsĪ 529 plan is a state-sponsored program that allows parents, relatives and friends to invest in a child's (or any person's) K-12 and college education.Get Automated Investing with Professional Guidance.Meet the experts behind Schwab's investing insights.Environmental, Social and Governance (ESG) Investing.Bond Funds, Bond ETFs, and Preferred Securities.ADRs, Foreign Ordinaries & Canadian Stocks.Environmental, Social and Governance (ESG) ETFs.Environmental, Social and Governance (ESG) Mutual Funds. ![]() Benefits and Considerations of Mutual Funds.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |